Paper on Managing Change in the Workplace?

With the senario of :

A major health care organization has decided to use electronic medical records. The employees in this organization are resistant to change, paticularly changes that deal with technology.

le
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r
n

in
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o
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t
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o
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e
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Managing
Human
Resources

CHAPTER

6.1

Describe
the key

components of
the HRM process

and what

influences it.

Discuss
the tasks

associated with
identifying

and selecting
competent
employees.

6.2

Describe
strategies for

retaining
competent,

high-performing
employees.

6.4

Discuss
contemporary

issues in
managing

human
resources.

6.5

6.3

Explain
how

employees

are provided
with needed

skills and
knowledge.

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Published by Prentice Hall. Copyright © 2011 by Pearson Education, Inc.

It’s probably one of the hardest things that a manager may have to
do.1 Telling an employee that he or she is being laid off. And some
7.2 million Americans who have been laid off since the economic
recession began in early 2008 have been given that news by some-
one. In smaller businesses, it’s especially difficult to do because
it’s often more personal and employees are more like family. In
carrying out such an assignment, managers may fear that employ-
ees will get highly emotional or angry, although those reactions
don’t happen often. Such reactions are more likely when workers
have no notice that layoffs are coming. That’s when the situation
can become very raw as those being laid off respond with expres-
sions of shock and disbelief and sometimes crying.

At Ram Tool, a small family-owned manufacturing company in
Grafton, Wisconsin, the task fell to Shelly Polum (see photo on
right), the company’s vice president of administration. After the nine-
member management team met to consider which employees would be laid off, Shelly had to inform

four workers that they were being let go. “When it was over, trying to maintain her
composure, she rushed back to her office and shut the door quickly. Then she sank

to the floor and burst into tears.”
At Shuqualak Lumber in Shuqualak, Mississippi, vice president Charlie Thomas

started his speech to employees announcing that nearly a quarter of them were going
to be laid off. He had to stop to go back to his office and regain his composure. He

says, “I couldn’t get it out. It just killed me.” And it’s not just American managers
facing the emotional challenge of laying off employees.

In Ditzingen, Germany, at TRUMPF, a laser machine tools manufac-
turer, company president Nicola Leibinger-Kammüller says, “The respon-

sibility I have for our employees is what is dearest to my heart.”
However, the worldwide economic recession has severely

impacted the company’s exports and revenues and TRUMPF
executives are contemplating employee layoffs for the first time
in 20 years. Says Leibinger-Kammüller, “What vexes me day
and night is the idea that I would have to lay people off.”

Studies of managers involved with layoffs have shown that
those who must tell people they’ve been laid off also experi-
ence stress, poor sleep, and even health problems. In one
study, managers called the layoffs “gut-wrenching” and
“devastating.” And these problems often can linger. In that
same study, those managers had mostly regained their
emotional health up to six years after the layoffs, but
were still more likely than other managers to have stress-
related health problems.

Managers who’ve had to deal several times with
telling employees they’re laid off say that, “It gets a

little easier with experience.” They soon learned how to
tell people in the least hurtful way and to emphasize that it

was the job that was being eliminated. However, one manager who
has laid off several dozen workers during her 25 years at Union Oil

Company says, “It’s not that you ever lose the butterflies in your
stomach or that sinking feeling, but you get better at handling it

as something that is not personal.”

153

Shedding Workers and Tears

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6.1

Describe
the key

components of
the HRM

process and
what

influences it.

With the organization’s structure in place, managers have to find people to fill the jobs that

have been created or to remove people from the jobs if business circumstances require that.

That’s where human resource management (HRM) comes in. It’s an important task that involves

having the right number of the right people in the right place at the right time. In this chapter,

we’ll look at the process managers use to do just that. In addition, we’ll look at some contem-

porary HRM issues facing managers.

What Is the Human Resource
Management Process and What
Influences It?
The quality of an organization is to a large degree determined by the qual-
ity of the people it employs. Success for most organizations depends on

finding the employees with the skills to successfully perform the tasks
required to attain the company’s strategic goals. Staffing and human resource

management decisions and methods are critical to ensuring that the organiza-
tion hires and keeps the right people.

Some of you may be thinking, “Sure, personnel decisions are important. But aren’t
most of them made by people who specifically handle human resource issues?” It’s true
that, in many organizations, a number of the activities grouped under the label human
resource management (HRM) are done by specialists. In other cases, HRM activities may
be outsourced to companies, domestic or global. Not all managers have HRM staff support,
though. Many small business managers, for instance, frequently must do their own hiring
without the assistance of HRM specialists. Even managers in larger organizations are often
involved in recruiting candidates, reviewing application forms, interviewing applicants, ori-
enting new employees, making decisions about employee training, providing career advice
to employees, and evaluating employees’ performance. So, even if an organization provides
HRM support activities, every manager is involved with human resource decisions in his or
her unit.2

Exhibit 6-1 introduces the key components of an organization’s HRM process. It rep-
resents eight activities (the gold boxes) that, if properly executed, will staff an organization
with competent, high-performing employees who are capable of sustaining their perform-
ance level over the long term.

After an organization’s strategy has been established and the organization structure
designed, it’s time to add the people. That’s one of the most critical roles for HRM and one
that has increased the importance of human resource managers to the organization. The first
three activities in the HRM process represent employment planning: the addition of staff
through recruitment, the reduction in staff through downsizing, and selection. When exe-
cuted properly, these steps lead to the identification and selection of competent employees
and assist organizations in achieving their strategic directions.

Once you select competent people, you need to help them adapt to the organization and
ensure that their job skills and knowledge are kept current. These next two activities in the
HRM process are accomplished through orientation and training. The last steps in the HRM
process are designed to identify performance goals, correct performance problems if neces-
sary, and help employees sustain a high level of performance over their entire work life. The
activities involved include performance appraisal, and compensation and benefits. HRM also
includes safety and health issues, but we’re not covering those topics in this book.

Notice in Exhibit 6-1 that the entire process is influenced by the external environment.
Many of the factors introduced in Chapter 2 directly affect all management practices, but
their effect is felt the most in managing the organization’s human resources, because what-
ever happens to an organization ultimately influences what happens to its employees. So,
before we review the HRM process, let’s examine one primary environmental force that
affects it—the legal environment, and especially, employment and discrimination laws.

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C H A P T E R 6 | M A N A G I N G H U M A N R E S O U R C E S 155

Recruitment
and

downsizing

Orientation

Identification
and selection
of competent

employees

Adapted and
competent

employees with
up-to-date skills,
knowledge, and

abilities

Competent and high-
performing employees

who are capable of
sustaining high

performance over the
long term

Safety
and

health

Performance
management

Compensation
and

benefits

Strategic
human

resource
planning

Selection

Training
and

development
Legislation

Diversity

W
or

k
P
ro

ce
ss

R
e
st

ru
c
tu

ri
n
g

Do
wn

siz
ing

Environment

Unions

EXHIBIT 6-1 The Human Resource Management Process

What Is the Legal Environment of HRM?
HRM practices are governed by laws, which vary from country to country. Within countries,
state or provincial and local regulations further influence specific practices. Consequently, it’s
impossible to provide you with all the information you need about the relevant regulatory envi-
ronment. As a manager, it will be important for you to know what you can and cannot do, legally.

WHAT ARE THE PRIMARY U.S. LAWS AFFECTING HRM? Since the mid-1960s, the federal
government in the United States has greatly expanded its influence over HRM by enacting
a number of laws and regulations (see Exhibit 6-2 for examples). Although we’ve not seen

human resource management (HRM)
The management function concerned with
getting, training, motivating, and keeping
competent employees.

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156 PA R T T H R E E | O R G A N I Z I N G

YEAR LAW OR REGULATION DESCRIPTION

1963 Equal Pay Act Prohibits pay differences based on sex for equal work

1964 (amended, Civil Rights Act, Title VII Prohibits discrimination based on race, color, religion, national
in 1972) origin or sex

1967 (amended Age Discrimination in Employment Act Prohibits age discrimination against employees between 40
in 1978) and 65 years of age

1973 Vocational Rehabilitation Act Prohibits discrimination on the basis of physical or mental
disabilities

1974 Privacy Act Gives employees the legal right to examine letters of reference
concerning them

1978 Pregnancy Discrimination Act, Title VII Prohibits dismissal because of pregnancy alone and protects
job security during maternity leaves

1978 Mandatory Retirement Act Prohibits the forced retirement of most employees before the
age of 70; later amended to eliminate upper limit

1986 Immigration Reform and Control Act Prohibits unlawful employment of aliens and unfair
immigration-related employment practices

1988 Polygraph Protection Act Limits an employer’s ability to use lie detectors

1988 Worker Adjustment and Retraining Requires employers to provide 60 days’ notice before a
Notification Act facility closing or mass layoff

1990 Americans with Disabilities Act Prohibits employers from discriminating against and requires
reasonable accommodation of essentially qualified individuals
with physical or mental disabilities or the chronically ill

1991 Civil Rights Act Reaffirms and tightens prohibition of discrimination; permits
individuals to sue for punitive damages in cases of intentional
discrimination

1993 Family and Medical Leave Act Permits employees in organizations with 50 or more workers to
take up to 12 weeks of unpaid leave each year for family or
medical reasons

2002 Sarbanes–Oxley Act Establishes requirements for proper financial record keeping for
public companies and penalties for noncompliance

2007 Federal Minimum Wage Bill Increases federal minimum wage rates—$5.85 summer of 2007;
$6.55 summer of 2008; and $7.25 in summer 2009

2009 Lilly Ledbetter Fair Pay Act Changes the statute of limitations on pay discrimination to 180
days from each paycheck

EXHIBIT 6-2 Major U.S. Federal HRM Laws

many laws enacted recently at the federal level, many state laws have been passed that add
to the provisions of the federal laws. For instance, in many states today, it’s illegal to dis-
criminate against an individual based on sexual orientation. As a result, today’s employers
must ensure that equal employment opportunities exist for job applicants and current
employees. Decisions regarding who will be hired, for example, or which employees will
be chosen for a management training program must be made without regard to race, sex,
religion, age, color, national origin, or disability. Exceptions can occur only when special
circumstances exist. For instance, a community fire department can deny employment to a
firefighter applicant who is confined to a wheelchair, but if that same individual is apply-
ing for a desk job, such as a fire department dispatcher, the disability cannot be used as a
reason to deny employment. The issues involved, however, are rarely that clear-cut. For
example, employment laws protect most employees whose religious beliefs require a spe-
cific style of dress—robes, long shirts, long hair, and the like. However, if the specific
style of dress may be hazardous or unsafe in the work setting (e.g., when operating machin-
ery), a company could refuse to hire a person who would not adopt a safer dress code.

Trying to balance the “shoulds and should nots” of these laws often falls within the
realm of affirmative action programs. Many organizations operating in the United States
have affirmative action programs to ensure that decisions and practices enhance the employ-
ment, upgrading, and retention of members from protected groups such as minorities and

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Fundamentals of Management: Essential Concepts and Applications, Seventh Edition, by Stephen P. Robbins, David A. DeCenzo, and Mary Coulter.
Published by Prentice Hall. Copyright © 2011 by Pearson Education, Inc.

C H A P T E R 6 | M A N A G I N G H U M A N R E S O U R C E S 157

From the Past to the Present• •
Hugo Munsterberg was a pioneer in the field of industrial psy-
chology and is “generally credited with creating the field.”3 As
an admirer of Frederick W. Taylor and the scientific manage-
ment movement, Munsterberg stated that “Taylor had intro-
duced most valuable suggestions which the industrial world
cannot ignore.” Drawing on Taylor’s works, Munsterberg
stressed “the importance of efficiently using workers to
achieve economic production.” His research and work in
showing organizations ways to improve the performance and
well-being of workers was fundamental to the emerging field
of management in the early 1900s.

Today, industrial-organizational psychology is defined as
the scientific study of the workplace. Industrial-organizational

(I/O) psychologists use scientific principles and research-
based designs to generate knowledge about workplace
issues. (Check out the Society for Industrial and Organiza-
tional Psychology at www.siop.org.) They study organiza-
tional topics such as job performance, job analysis,
performance appraisal, compensation, work/life balance,
work sample tests, employee training, employment law, per-
sonnel recruitment and selection, and so forth. Their research
has contributed much to the field that we call human
resource management. And all of this is due to the early work
done by Hugo Munsterberg.

females. That is, the organization refrains from discrimination and actively seeks to enhance
the status of members from protected groups.

U.S. managers are not completely free to choose whom they hire, promote, or fire.
Although these regulations have significantly helped to reduce employment discrimination
and unfair employment practices, they have, at the same time, reduced management’s dis-
cretion over HR decisions.

ARE HRM LAWS THE SAME GLOBALLY? HRM laws aren’t the same globally. You need to
know the laws and regulations that apply in your locale. To illustrate our point that laws and
regulations shape HRM practices, we highlight some of the federal legislation in countries
such as Canada, Mexico, Australia, and Germany.

Canadian laws pertaining to HRM practices closely parallel those in the United States.
The Canadian Human Rights Act prohibits discrimination on the basis of race, religion,
age, marital status, sex, physical or mental disability, or national origin. This act governs
practices throughout the country. Canada’s HRM environment, however, is somewhat dif-
ferent from that in the United States in that it involves more decentralization of lawmaking
to the provincial level. For example, discrimination on the basis of language is not prohib-
ited anywhere in Canada except in Quebec.

In Mexico, employees are more likely to be unionized than they are in the United States.
Labor matters in Mexico are governed by the Mexican Federal Labor Law. One hiring law
states that an employer has 28 days to evaluate a new employee’s work performance. After
that period, the employee is granted job security and termination is quite difficult and expen-
sive. Those who violate the Mexican Federal Labor Law are subject to severe penalties,
including criminal action that can result in steep fines and even jail sentences for employ-
ers who fail to pay, for example, the minimum wage.

Australia’s discrimination laws were not enacted until the 1980s, and generally apply
to discrimination and affirmative action for women. Yet, gender opportunities for women in
Australia appear to lag behind those in the United States. In Australia, however, a signifi-
cant proportion of the workforce is unionized. The higher percentage of unionized workers
has placed increased importance on industrial relations specialists in Australia, and reduced

affirmative action programs
Programs that ensure that decisions and
practices enhance the employment,
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Discuss
the tasks

associated with
identifying

and selecting
competent
employees.

6.2

158 PA R T T H R E E | O R G A N I Z I N G

the control of line managers over workplace labor issues. However, in 1997, Australia over-
hauled its labor and industrial relations laws with the objective of increasing productivity
and reducing union power. The Workplace Relations Bill gives employers greater flexibil-
ity to negotiate directly with employees on pay, hours, and benefits. It also simplifies fed-
eral regulation of labor-management relations.

Our final example, Germany, is similar to most Western European countries when it
comes to HRM practices. Legislation requires companies to practice representative partic-
ipation, in which the goal is to redistribute power within the organization, putting labor on
a more equal footing with the interests of management and stockholders. The two most
common forms of representative participation are work councils and board representatives.
Work councils link employees with management. They are groups of nominated or elected
employees who must be consulted when management makes decisions involving personnel.
Board representatives are employees who sit on a company’s board of directors and repre-
sent the interest of the firm’s employees.

How Do Managers Identify and Select
Competent Employees?
Every organization needs people to do whatever work is necessary for doing
what the organization is in business to do. How do organizations get those
people? And more importantly what can they do to ensure they get competent,
talented people? This first phase of the HRM process involves three tasks:

employment planning, recruitment and downsizing, and selection.

What Is Employment Planning?
In the first four months of 2009, Boeing cut more than 3,000 jobs, mostly from its commer-
cial airplanes unit. During the same time, it added 106 employees to its defense unit and was
looking for several hundred more.4 Like most companies, Boeing was juggling its supply of
human resources to meet demand.

Employment planning is the process by which managers ensure that they have the right
number and kinds of people in the right places at the right times, people who are capable of
effectively and efficiently completing those tasks that will help the organization achieve its
overall goals. Employment planning, then, translates the organization’s mission and goals
into an HR plan that will allow the organization to achieve those goals. The process can be
condensed into two steps: (1) assessing current human resources and future human resource
needs, and (2) developing a plan to meet those needs.

HOW DOES AN ORGANIZATION CONDUCT AN EMPLOYEE ASSESSMENT? Managers
begin by reviewing the current human resource status. This review is typically done by gen-
erating a human resource inventory. It’s not difficult to generate an inventory in most
organizations since the information for it is derived from forms completed by employees.
Such inventories might list the name, education, training, prior employment, languages spo-
ken, capabilities, and specialized skills of each employee in the organization. This inventory
allows managers to assess what talents and skills are currently available in the organization.

Another part of the current assessment is job analysis. Whereas the human resources
inventory is concerned with telling management what individual employees can do, job analy-
sis is more fundamental. It’s typically a lengthy process, one in which workflows are analyzed
and skills and behaviors that are necessary to perform jobs are identified. For instance, what
does an international reporter who works for the Wall Street Journal do? What minimal knowl-
edge, skills, and abilities are necessary for the adequate performance of this job? How do the
job requirements for an international reporter compare with those for a domestic reporter or
for a newspaper editor? Job analysis can answer these questions. Ultimately, the purpose of job
analysis is to determine the kinds of skills, knowledge, and attitudes needed to successfully per-
form each job. This information is then used to develop or revise job descriptions and job
specifications.

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Published by Prentice Hall. Copyright © 2011 by Pearson Education, Inc.

C H A P T E R 6 | M A N A G I N G H U M A N R E S O U R C E S 159

An organization’s strategic direction
determines its future human resource
needs. Following Target Corporation’s
growth strategy, the discount retailer
plans to add about 100 stores a year
through 2011, although the actual
number may fluctuate depending on
economic conditions. Each of Target’s
three different store formats requires a
different number of employees: general
merchandise from 100 to 250; general
merchandise with an expanded food
format from100 to 250; and Super Target
with full grocery, deli, and bakery from
200 to 300. Knowing the number of
planned stores and the type of format
helps Target managers determine its
human resource needs.

A job description is a written statement that describes the job—what a job
holder does, how it’s done, and why it’s done. It typically portrays job content,
environment, and conditions of employment. The job specification states the
minimum qualif ications that a person must possess to perform a given job
successfully. It focuses on the person and identifies the knowledge, skills, and
attitudes needed to do the job effectively. The job description and job specifica-
tion are important documents when managers begin recruiting and selecting. For
instance, the job description can be used to describe the job to potential candi-
dates. The job specification keeps the manager’s attention on the list of qualifi-
cations necessary for an incumbent to perform a job and assists in determining
whether candidates are qualified. Furthermore, hiring individuals on the basis of
the information contained in these two documents helps ensure that the
hiring process does not discriminate.

HOW ARE FUTURE EMPLOYEE NEEDS DETERMINED? Future human
resource needs are determined by the organization’s strategic direction.
Demand for human resources (employees) is a result of demand for the organization’s
products or services. On the basis of an estimate of total revenue, managers can attempt
to establish the number and mix of people needed to reach that revenue. In some cases,
however, the situation may be reversed. When particular skills are necessary and in scarce
supply, the availability of needed human resources determines revenues. For example,
managers of an upscale chain of assisted-living retirement facilities who find them-
selves with abundant business opportunities are limited in building revenues by their
ability to locate and hire a qualified nursing staff to fully meet the needs of the residents. In
most cases, however, the overall organizational goals and the resulting revenue forecast
provide the major input in determining the organization’s HR requirements.

After it has assessed both current capabilities and future needs, managers are able to
estimate shortages—both in number and in kind—and to highlight areas in which the
organization is overstaffed. A plan can then be developed that matches these estimates with
forecasts of future labor supply. Employment planning not only guides current staffing
needs but also projects future employee needs and availability.

HOW DO ORGANIZATIONS RECRUIT EMPLOYEES? Once managers know their current
staffing levels—whether understaffed or overstaffed—they can begin to do something
about it. If one or more vacancies exist, they can use the information gathered through job
analysis to guide them in recruitment—that is, the process of locating, identifying, and
attracting capable applicants. On the other hand, if employment planning indicates a
surplus, managers will want to reduce the labor supply within the organization and will
initiate downsizing or restructuring activities.

WHERE DOES A MANAGER RECRUIT APPLICANTS? Applicants can be found by using
several sources, including the Internet. Exhibit 6-3 offers some guidance. The source
that’s used should reflect the local labor market, the type or level of position, and the size
of the organization.

board representatives
Employees who sit on a company’s board of
directors and represent the interest of
employees.

work councils
Groups of nominated or elected employees
who must be consulted when management
makes decisions involving personnel.

job specification
A written statement of the minimum
qualifications that a person must possess to
perform a given job successfully.

job description
A written statement that describes a job.

job analysis
An assessment that defines jobs and the
behaviors necessary to perform them.

human resource inventory
A report listing important information about
employees such as name, education, training,
skills, languages spoken, and so forth.

employment planning
The process by which managers ensure they
have the right numbers and kinds of people in
the right places at the right time.

recruitment
Locating, identifying, and attracting capable
applicants.

160 PA R T T H R E E | O R G A N I Z I N G

SOURCE ADVANTAGE DISADVANTAGE

Internal searches Low cost; build employee Limited supply; may not
morale; candidates are increase proportion of protected
familiar with organization group employees

Advertisements Wide distribution can be Generate many
targeted to specific groups unqualified candidates

Employee referrals Knowledge about the May not increase the diversity
organization provided by and mix of employees
current employees; can
generate strong candidates
because a good referral
reflects on the recommender

Public employment Free or nominal cost Candidates tend to be lower
agencies skilled, although some skilled

employees available

Private employment Wide contacts; careful High cost
agencies screening; short-term

guarantees often given

School placement Large, centralized body Limited to entry-level positions
of candidates

Temporary help services Fill temporary needs Expensive

Employee leasing Fill temporary needs but Little commitment to an
and independent usually for more specific, organization other than
contractors longer-term projects current project

EXHIBIT 6-3 Recruiting Sources

Do certain recruiting sources produce superior applicants? The answer is generally yes. The
majority of studies have found that employee referrals generally produce the best applicants.5

The explanation for this finding is intuitively logical. First, applicants referred by current
employees are prescreened by those employees. Because the recommenders know both the job
and the person being recommended, they tend to refer well-qualified applicants.6 Second,
because current employees often feel that their reputation in the organization is at stake with a
referral, they tend to make referrals only when they are reasonably confident that the referral
won’t make them look bad. However, managers shouldn’t always opt for the employee-referred
applicant since such referrals may not increase the diversity and mix of employees.

How Does a Manager Handle Layoffs?
In the past decade, and especially during the last year, most global organizations, as well as
many government agencies and small businesses, have been forced to shrink the size of
their workforce or restructure their skill composition. Downsizing has become a relevant
strategy for meeting the demands of a dynamic environment.

WHAT ARE DOWNSIZING OPTIONS? Obviously, people can be fired, but other restructur-
ing choices may be more beneficial to the organization. Exhibit 6-4 summarizes a manag-
er’s major downsizing options. Keep in mind that, regardless of the method chosen,
employees may suffer. We discuss downsizing more fully—for both victims and sur-
vivors—later in this chapter.

How Do Managers Select Job Applicants?
Once the recruiting effort has developed a pool of applicants, the next step in the HRM
process is to determine who is best qualified for the job. In essence, then, the selection
process is a prediction exercise: It seeks to predict which applicants will be “successful” if
hired; that is, who will perform well on the criteria the organization uses to evaluate its

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Fundamentals of Management: Essential Concepts and Applications, Seventh Edition, by Stephen P. Robbins, David A. DeCenzo, and Mary Coulter.
Published by Prentice Hall. Copyright © 2011 by Pearson Education, Inc.

C H A P T E R 6 | M A N A G I N G H U M A N R E S O U R C E S 161

OPTION DESCRIPTION

Firing Permanent involuntary termination

Layoffs Temporary involuntary termination; may last only a few days or
extend to years

Attrition Not filling openings created by voluntary resignations or normal
retirements

Transfers Moving employees either laterally or downward; usually does
not reduce costs but can reduce intraorganizational
supply–demand imbalances

Reduced workweeks/ Having employees work fewer hours per week, share jobs, or
furloughs perform their jobs on a part-time basis

Early retirements Providing incentives to older and more-senior employees for
retiring before their normal retirement date

Job sharing Having employees, typically two part-timers, share one full-time
position

EXHIBIT 6-4 Downsizing Options

employees. In filling a network administrator position, for example, the selection process
should be able to predict which applicants will be capable of properly installing, debugging,
and managing the organization’s computer network. For a position as a sales representative,
it should predict which applicants will be successful at generating high sales volumes.
Consider, for a moment, that any selection decision can result in four possible outcomes. As
shown in Exhibit 6-5, two outcomes would indicate correct decisions, and two would indi-
cate errors.

A decision is correct (1) when the applicant who was predicted to be successful (was
accepted) and later proved to be successful on the job, or (2) when the applicant who was
predicted to be unsuccessful (was rejected) and, if hired, would not have been able to do the
job. In the former case, we have successfully accepted; in the latter case, we have success-
fully rejected. Problems occur, however, when we reject applicants who, if hired, would have

selection process
Screening job applicants to ensure that the
most appropriate candidates are hired.

Reject

error

Correct
decision

error

Reject

Selection Decision

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c
e
ss
fu
l

EXHIBIT 6-5 Selection Decision Outcomes

162 PA R T T H R E E | O R G A N I Z I N G

performed successfully on the job (called reject errors) or accept those who subsequently
perform poorly (accept errors). These problems are, unfortunately, far from insignificant.
A generation ago, reject errors only meant increased selection costs because more applicants
would have to be screened. Today, selection techniques that result in reject errors can open
the organization to charges of employment discrimination, especially if applicants from pro-
tected groups are disproportionately rejected. Accept errors, on the other hand, have obvi-
ous costs to the organization, including the cost of training the employee, the costs generated
or profits forgone because of the employee’s incompetence, and the cost of severance and
the subsequent costs of additional recruiting and selection screening. The major intent of any
selection activity is, therefore, to reduce the probability of making reject errors or accept
errors while increasing the probability of making correct decisions. We do this by using
selection procedures that are both reliable and valid.

WHAT IS RELIABILITY? Reliability addresses whether a selection device measures the
same characteristic consistently. For example, if a test is reliable, any individual’s score
should remain fairly stable over time, assuming that the characteristics it is measuring
are also stable. The importance of reliability should be self-evident. No selection device
can be effective if it’s low in reliability. Using such a device would be the equivalent of
weighing yourself every day on an erratic scale. If the scale is unreliable—randomly
fluctuating, say, 10 to 15 pounds every time you step on it—the results will not mean
much. To be effective predictors, selection devices must possess an acceptable level of
consistency.

WHAT IS VALIDITY? Any selection device that a manager uses—such as application forms,
tests, interviews, or physical examinations—must also demonstrate validity. Validity is based
on a proven relationship between the selection device used and some relevant measure. For
example, we mentioned earlier a firefighter applicant who was wheelchair bound. Because of
the physical requirements of a firefighter’s job, someone confined to a wheelchair would be
unable to pass the physical endurance tests. In that case, denying employment could be con-
sidered valid, but requiring the same physical endurance tests for the dispatching job would
not be job related. Federal law prohibits managers from using any selection device that
cannot be shown to be directly related to successful job performance. That constraint goes for
entrance tests, too; managers must be able to demonstrate that, once on the job, individuals
with high scores on such a test outperform individuals with low scores. Consequently, the
burden is on the organization to verify that any selection device it uses to differentiate appli-
cants is related to job performance.

MANAGING DIVERSITY | Diversity and Discrimination

Data released by the Equal Employment Opportunity
Commission in early 2009 stated that more people experi-
enced workplace discrimination in 2008 than ever
before.7 More than 95,400 job-bias claims were filed, an
increase of 15 percent over the previous year. All major
categories of workplace discrimination saw increases
although age and retaliation claims increased the most.
Charges of age discrimination jumped by 28.7 percent,
while complaints about retaliation were up 22.6 percent.
The acting chairperson of the agency said, “The EEOC
has not seen an increase of this magnitude in charges
filed for many years. While we do not know if this signifies
a trend, it is clear that employment discrimination remains
a persistent problem.”

What seems to be driving these numbers? The major
reason, according to analysts, is likely to be the current
economic conditions. “The economy is in meltdown mode
and from the point of view of the company, if you lay off an
older worker, the cost savings are greater than if you lay off
a younger worker.” However, another reason, experts
believe, is a greater awareness of EEOC policy. That can be
considered a sign of the impact that equal employment
opportunity advocates have had.

Managers have the responsibility of ensuring that their
HRM policies and practices don’t violate discrimination laws
and regulations. It’s especially critical in today’s environ-
ment where employees are facing stress and uncertainty
over personal and work issues.

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C H A P T E R 6 | M A N A G I N G H U M A N R E S O U R C E S 163

HOW EFFECTIVE ARE TESTS AND INTERVIEWS AS SELECTION DEVICES? Managers
can use a number of selection devices to reduce accept and reject errors. The best-
known devices include written and performance-simulation tests and interviews. Let’s
briefly review each device, giving particular attention to its validity in predicting job
performance.

Typical written tests include tests of intelligence, aptitude, ability, and interest.
Such tests have long been used as selection devices, although their popularity has run
in cycles. Written tests were widely used after World War II, but beginning in the late
1960s, they fell out of favor. They were frequently characterized as discriminatory, and
many organizations could not validate that their written tests were job related. Today,
written tests have made a comeback although most of them are now Internet based.8

Managers are increasingly aware that poor hiring decisions are costly and that properly
designed tests can reduce the likelihood of making such decisions. In addition, the
cost of developing and validating a set of written tests for a specif ic job has declined
signif icantly.

A review of the evidence finds that tests of intellectual ability, spatial and mechani-
cal ability, perceptual accuracy, and motor ability are moderately valid predictors for many
semiskilled and unskilled operative jobs in industrial organizations.9 However, an endur-
ing criticism of written tests is that intelligence and other tested characteristics can be
somewhat removed from the actual performance of the job itself.10 For example, a high
score on an intelligence test is not necessarily a good indicator that the applicant will
perform well as a computer programmer. This criticism has led to an increased use of
performance-simulation tests.

What better way to find out whether an applicant for a technical writing position at
Google can write technical manuals than to ask him or her to do it? That’s why there’s
an increasing interest in performance-simulation tests. Undoubtedly, the enthusiasm
for these tests lies in the fact that they’re based on job analysis data and, therefore, should
more easily meet the requirement of job relatedness than do written tests. Performance-
simulation tests are made up of actual job behaviors rather than substitutes. The best-
known performance-simulation tests are work sampling (a miniature replica of the job)
and assessment centers (simulating real problems one may face on the job). The former
is suited to persons applying for routine jobs, the latter to managerial personnel.

The advantage of performance simulation over traditional testing methods should be
obvious. Because its content is essentially identical to
job content, performance simulation should be a better
predictor of short-term job performance and should min-
imize potential employment discrimination allegations.
Additionally, because of the nature of their content and
the methods used to determine content, well-constructed
performance-simulation tests are valid predictors.

The interview, along with the application form, is
an almost universal selection device. Few of us have ever
gotten a job without undergoing one or more interviews.
The irony of this is that the value of an interview as a
selection device has been the subject of considerable
debate.11

Interviews can be reliable and valid selection tools,
but too often they’re not. When interviews are structured
and well organized, and when interviewers are held to

validity
The proven relationship between a selection
device and some relevant criterion.

reliability
The degree to which a selection device
measures the same thing consistently.

performance-simulation tests
Selection devices based on actual job
behaviors.

The job interview is an almost universal
selection device. Air China used
professional job interviewers for the
process of selecting 300 new
stewardesses. Formal, structured, and
well organized, the interviews evaluated
candidates on their proficiency in English
and knowledge of the airline and the
industry. In China, the behavioral
interview is prevalent, with candidates
being carefully observed on how they
behave. Interviewers look for behaviors
such as speaking with a calm voice,
never speaking or acting in an
aggressive manner, maintaining good
posture, showing modesty and respect
for seniority and rank, demonstrating
good etiquette, never sitting down unless
invited to, and never interrupting the
interviewer.

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relevant questioning, interviews are effective predictors.12 But those conditions don’t charac-
terize many interviews. The typical interview in which applicants are asked a varying set of
essentially random questions in an informal setting often provides little in the way of valuable
information.

All kinds of potential biases can creep into interviews if they’re not well structured and
standardized. To illustrate, a review of the research leads us to the following conclusions:

� Prior knowledge about the applicant will bias the interviewer’s evaluation.
� The interviewer tends to hold a stereotype of what represents a good applicant.
� The interviewer tends to favor applicants who share his or her own attitudes.
� The order in which applicants are interviewed will influence evaluations.
� The order in which information is elicited during the interview will influence evaluations.
� Negative information is given unduly high weight.
� The interviewer may make a decision concerning the applicant’s suitability within the

first four or five minutes of the interview.
� The interviewer may forget much of the interview’s content within minutes after its

conclusion.
� The interview is most valid in determining an applicant’s intelligence, level of motivation,

and interpersonal skills.
� Structured and well-organized interviews are more reliable than unstructured and unor-

ganized ones.13

What can managers do to make interviews more valid and reliable? A number of
suggestions have been made over the years. We list some in the “Developing Your Inter-
viewing Skill” box.

One last modification to interviews that’s now popular is the behavioral or situation
interview.14 In this type of interview, applicants are observed not only for what they say, but
also how they behave. Applicants are presented with situations—often complex problems
involving role playing—and are asked to “deal” with the situation. This type of interview
provides an opportunity for interviewers to see how a potential employee will behave and
how he or she will react under stress. Proponents of behavioral interviewing indicate such
a process is much more indicative of an applicant’s performance than simply having the
individual tell the interviewer what he or she has done. In fact, research in this area indicates
that behavioral interviews are nearly eight times more effective for predicting successful
job performance.15

HOW CAN YOU “CLOSE THE DEAL”? Interviewers who treat the recruiting and hiring of
employees as if the applicants must be sold on the job and exposed only to an organiza-
tion’s positive characteristics are likely to have a workforce that is dissatisfied and prone to
high turnover.16

During the hiring process, every job applicant acquires a set of expectations about
the company and about the job for which he or she is interviewing. When the informa-
tion an applicant receives is excessively inflated, a number of things happen that have
potentially negative effects on the company. First, mismatched applicants are less likely
to withdraw from the search process. Second, because inflated information builds unre-
alistic expectations, new employees are likely to become quickly dissatisf ied and to
resign prematurely. Third, new hires are prone to become disillusioned and less commit-
ted to the organization when they face the unexpected harsh realities of the job. In many
cases, these individuals feel that they were misled during the hiring process and may
become problem employees.

To increase job satisfaction among employees and reduce turnover, managers should
consider a realistic job preview (RJP).17 An RJP includes both positive and negative infor-
mation about the job and the company. For example, in addition to the positive comments
typically expressed in the interview, the applicant is told of the less attractive aspects of
the job. For instance, he or she might be told that there are limited opportunities to talk
to coworkers during work hours, that chances of being promoted are slim, or that work

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Published by Prentice Hall. Copyright © 2011 by Pearson Education, Inc.

C H A P T E R 6 | M A N A G I N G H U M A N R E S O U R C E S 165

Developing Your Skill

About the Skill
Every manager needs to develop his or her interviewing
skills. The following discussion highlights the key behaviors
associated with this skill.

Steps in Practicing the Skill
1 Review the job description and job specification.

Reviewing pertinent information about the job pro-
vides valuable information about how to assess the
candidate. Furthermore, relevant job requirements
help to eliminate interview bias.

2 Prepare a structured set of questions to ask all
applicants for the job. By having a set of prepared
questions, you ensure that the information you wish to
elicit is attainable. Furthermore, if you ask all applicants
similar questions, you’re better able to compare their
answers against a common base.

3 Before meeting an applicant, review his or her
application form and résumé. Doing so helps you to
create a complete picture of the applicant in terms of
what is represented on the résumé or application and
what the job requires. You will also begin to identify
areas to explore in the interview. That is, areas that are
not clearly defined on the résumé or application but
that are essential for the job will become a focal point
of your discussion with the applicant.

4 Open the interview by putting the applicant at
ease and by providing a brief preview of the topics
to be discussed. Interviews are stressful for job appli-
cants. By opening with small talk (e.g., the weather),
you give the person time to adjust to the interview set-
ting. By providing a preview of topics to come, you’re
giving the applicant an agenda that helps the individ-
ual begin framing what he or she will say in response to
your questions.

5 Ask your questions and listen carefully to the appli-
cant’s answers. Select follow-up questions that natu-
rally flow from the answers given. Focus on the
responses as they relate to information you need to
ensure that the applicant meets your job require-
ments. Any uncertainty you may still have requires a
follow-up question to probe further for the information.

6 Close the interview by telling the applicant what’s
going to happen next. Applicants are anxious about
the status of your hiring decision. Be honest with the
applicant regarding others who will be interviewed
and the remaining steps in the hiring process. If you
plan to make a decision in two weeks or so, let the indi-
vidual know what you intend to do. In addition, tell the
applicant how you will let him or her know about your
decision.

7 Write your evaluation of the applicant while the
interview is still fresh in your mind. Don’t wait until
the end of your day, after interviewing several appli-
cants, to write your analysis of each one. Memory can
fail you. The sooner you complete your write-up after
an interview, the better chance you have of accu-
rately recording what occurred in the interview.

Practicing the Skill
Review and update your résumé. Then have several friends
critique it who are employed in management-level positions
or in management training programs. Ask them to explain
their comments and make any changes to your résumé
that they think will improve it. Now inventory your interper-
sonal and technical skills and any practical experiences
that do not show up in your résumé. Draft a set of leading
questions you would like to be asked in an interview that
would give you a chance to discuss the unique qualities
and attributes you could bring to the job.

realistic job preview (RJP)
A preview of a job that provides both positive
and negative information about the job and
the company.

hours fluctuate so erratically that employees may be required to work during what are
usually off hours (nights and weekends). Research indicates that applicants who have
been given a realistic job preview hold lower and more realistic job expectations for the
jobs they will be performing and are better able to cope with the frustrating elements of
the job than are applicants who have been given only inflated information. The result is
fewer unexpected resignations by new employees. For managers, realistic job previews
offer a major insight into the HRM process. That is, it’s just as important to retain good

6.3

Explain
how

employees
are provided
with needed

skills and
knowledge.

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people as it is to hire them in the first place. Presenting only positive job aspects to an
applicant may initially entice him or her to join the organization, but it may be a decision
that both parties quickly regret.

How Are Employees Provided with Needed
Skills and Knowledge?
If we’ve done our recruiting and selecting properly, we should have hired
competent individuals who can perform successfully on the job. But suc-
cessful performance requires more than possessing certain skills. New hires

must be acclimated to the organization’s culture and be trained and given the
knowledge to do the job in a manner consistent with the organization’s goals.

To achieve this, HRM uses orientation and training.

How Are New Hires Introduced to the Organization?
Once a job candidate has been selected, he or she needs to be introduced to the job and
organization. This introduction is called orientation.18 The major goals of orientation are to
reduce the initial anxiety all new employees feel as they begin a new job; to familiarize new
employees with the job, the work unit, and the organization as a whole; and to facilitate the
outsider–insider transition. Job orientation expands on the information the employee
obtained during the recruitment and selection stages. The new employee’s specific duties and
responsibilities are clarified as well as how his or her performance will be evaluated.
Orientation is also the time to correct any unrealistic expectations new employees might
hold about the job. Work unit orientation familiarizes an employee with the goals of the
work unit, makes clear how his or her job contributes to the unit’s goals, and provides an
introduction to his or her coworkers. Organization orientation informs the new employee
about the organization’s goals, history, philosophy, procedures, and rules. This information
includes relevant HR policies such as work hours, pay procedures, overtime requirements,
and benefits. A tour of the organization’s physical facilities is often part of this orientation.

Managers have an obligation to make the integration of a new employee into the
organization as smooth and anxiety-free as possible. Successful orientation, whether for-
mal or informal, results in an outsider–insider transition that makes the new member feel
comfortable and fairly well-adjusted, lowers the likelihood of poor work performance,
and reduces the probability of a surprise resignation by the new employee only a week or
two into the job.19

HR AND IT

H
R has gone digital.20 Using software

that automates many basic HR

processes associated with recruiting,

selecting, orienting, training, appraising per-

formance, and storing and retrieving employee

information, HR departments have cut costs

and optimized service. The main area where IT

has had a significant impact is in training.

In a survey by the American Society for

Training and Development, 95 percent of the

responding companies reported using some

form of e-learning. Using technology to

deliver needed knowledge, skills, and atti-

tudes has had many benefits. As one

researcher said, “The ultimate purpose of e-

learning is not to reduce the cost of training,

but to improve the way your organization

does business.” And in many instances, it

seems to do that! For example, when

Hewlett-Packard looked at how its customer

service was affected by a blend of e-learning

and other instructional methods, rather than

just classroom training, it found that “sales

representatives were able to answer ques-

tions more quickly and accurately, enhanc-

ing customer-service provider relations.” And

Unilever found that after e-learning training

for sales employees, sales increased by

several million dollars.

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Published by Prentice Hall. Copyright © 2011 by Pearson Education, Inc.

C H A P T E R 6 | M A N A G I N G H U M A N R E S O U R C E S 167

What Is Employee Training?
On the whole, planes don’t cause airline accidents, people do. Most collisions,
crashes, and other airline mishaps—nearly three-quarters of them—result
from errors by the pilot or air traffic controller, or from inadequate mainte-
nance. Weather and structural failures typically account for the remaining
accidents.21 We cite these statistics to illustrate the importance of training in
the airline industry. Such maintenance and human errors could be prevented
or signif icantly reduced by better employee training, as shown by the
amazing “landing” of US Airways Flight 1549 in the Hudson River in
January 2009 with no loss of life. Pilot Captain Chesley Sullenberger attrib-
uted the positive outcome to the extensive and intensive training that all pilots
and flight crews undergo.22

Employee training is a learning experience that seeks a relatively perma-
nent change in employees by improving their ability to perform on the job. Thus,
training involves changing skills, knowledge, attitudes, or behavior.23 This
change may involve what employees know, how they work, or their attitudes
toward their jobs, coworkers, managers, and the organization. It’s been
estimated, for instance, that U.S. business firms spend billions each a year on
formal courses and training programs to develop workers’ skills.24 Managers, of
course, are responsible for deciding when employees are in need of training and
what form that training should take.

Determining training needs typically involves answering several questions. If some of
these questions sound familiar, you’ve been paying close attention. It’s precisely the type of
analysis that takes place when managers develop an organizational structure to achieve their
strategic goals—only now the focus is on the people.25

The leading questions in Exhibit 6-6 suggest the kinds of signals that can warn a
manager when training may be necessary. The more obvious ones are related directly to
productivity. Indications that job performance is declining include decreases in produc-
tion numbers, lower quality, more accidents, and higher scrap or rejection rates. Any of
these outcomes might suggest that worker skills need to be fine-tuned. Of course, we’re
assuming that an employee’s performance decline is in no way related to lack of effort.
Managers, too, must also recognize that training may be required because the workplace
is constantly evolving. Changes imposed on employees as a result of job redesign or a
technological breakthrough also require training.

HOW ARE EMPLOYEES TRAINED? Most training takes place on the job. Why? It’s simple
and it usually costs less. However, on-the-job training can disrupt the workplace and result
in an increase in errors while learning takes place. Also, some skill training is too complex
to learn on the job and must take place outside the work setting.

Many different types of training methods are available. For the most part, we can
classify them as on-the-job or off-the-job training. The more popular training methods
are summarized in Exhibit 6-7.

HOW CAN MANAGERS ENSURE THAT TRAINING IS WORKING? It’s easy to develop a
new training program, but if training efforts aren’t evaluated, any can be rationalized. It
would be nice if all companies could boast the returns on investments in training that
Neil Huffman Auto Group executives do; they claim they receive $230 in increased
productivity for every dollar spent on training.26 But such a claim cannot be made
unless training is properly evaluated.

orientation
Introducing a new employee to the job and the
organization.

Customer service training for new
employees of Seven and I Holdings,
Japan’s largest retail group, includes
teaching recruits how to assist blind,
disabled, and elderly customers. Trainees
also learn sign language so they can
communicate with hearing-impaired
shoppers. This training is a learning
experience designed to permanently
change employees’ abilities to perform
on the job. It involves changing their skills
in learning proper techniques in helping
customers and changing their attitudes
in making them aware of and more
sensitive to the special needs of
shoppers who require assistance.

employee training
A learning experience that seeks a relatively
permanent change in employees by improving
their ability to perform on the job.

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SAMPLE ON-THE-JOB TRAINING METHODS

Job rotation Lateral transfers allowing employees to work at different jobs.
Provides good exposure to a variety of tasks.

Understudy assignments Working with a seasoned veteran, coach, or mentor. Provides
support and encouragement from an experienced worker. In the
trades industry, this may also be an apprenticeship.

SAMPLE OFF-THE-JOB TRAINING METHODS

Classroom lectures Lectures designed to convey specific technical, interpersonal, or
problem-solving skills.

Films and videos Using media to explicitly demonstrate technical skills that are not
easily presented by other training methods.

Simulation exercises Learning a job by actually performing the work (or its
simulation). May include case analyses, experiential exercises,
role-playing, and group interaction.

Vestibule training Learning tasks on the same equipment that one actually will use
on the job but in a simulated work environment.

EXHIBIT 6-7 Typical Training Methods

How are training programs typically evaluated? The following approach is probably
generalizable across organizations: Several managers, representatives from HRM, and a
group of workers who have recently completed a training program are asked for their
opinions. If the comments are generally positive, the program may get a favorable
evaluation and it’s continued until someone decides, for whatever reason, that it should be
eliminated or replaced.

Such reactions from participants or managers, while easy to acquire, are the least
valid. Their opinions are heavily influenced by factors that may have little to do with the
training’s effectiveness—difficulty, entertainment value, or the personality characteris-
tics of the instructor. However, trainees’ reactions to the training may, in fact, provide

What deficiencies, if any,
do job holders have in terms

of skills, knowledge, or
abilities required to

exhibit the essential and
necessary job behaviors?

What behaviors are
necessary for each job holder

to complete his or her
job duties?

Is there a need
for training?

What are the
organization’s

strategic
goals?

What tasks
must be

completed
to achieve

organizational
goals?

EXHIBIT 6-6 Determining Whether Training Is Needed

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Fundamentals of Management: Essential Concepts and Applications, Seventh Edition, by Stephen P. Robbins, David A. DeCenzo, and Mary Coulter.
Published by Prentice Hall. Copyright © 2011 by Pearson Education, Inc.

6.4

Describe
strategies for

retaining
competent,

high-performing
employees.

C H A P T E R 6 | M A N A G I N G H U M A N R E S O U R C E S 169

performance management system
A system that establishes performance
standards that are used to evaluate employee
performance.

feedback on how worthwhile the participants viewed the training to be. Beyond general
reactions, however, training must also be evaluated in terms of how much the participants
learned; how well they are using their new skills on the job (did their behavior change?);
and whether the training program achieved its desired results (reduced turnover, increased
customer service, etc.).27

How Do Organizations Retain Competent,
High-Performing Employees?
Once an organization has invested significant dollars in recruiting, select-
ing, orienting, and training employees, it wants to keep them, especially
the competent, high-performing ones! Two HRM activities that play a role
in this are managing employee performance and developing an appropriate
compensation and benefits program.

What Is a Performance Management System?
It’s important for managers to get their employees to achieve performance levels that the
organization considers desirable. How do managers ensure that employees are performing
as well as they’re supposed to? In organizations, the formal means of assessing the work of
employees is through a systematic performance appraisal process.

A performance management system is a process of establishing performance stan-
dards and evaluating performance in order to arrive at objective human resource decisions—
such as pay increases and training needs—as well as to provide documentation to support any
personnel actions. But how do you evaluate an employee’s performance? We list specific
appraisal techniques in Exhibit 6-8.

The written essay requires no complex forms or extensive training to complete. However,
a “good” or “bad” appraisal may be determined as much by the evaluator’s writing skill as

METHOD ADVANTAGE DISADVANTAGE

Written essay Simple to use More a measure of evaluator’s
writing ability than of employee’s
actual performance

Critical incidents Rich examples; Time-consuming; lack
behaviorally based quantification

Graphic rating scales Provide quantitative Do not provide depth of job
data; less time-consuming behavior assessed
than others

BARS Focus on specific Time-consuming; difficult to
and measurable job develop measures
behaviors

Multiperson Compares employees Unwieldy with large number
with one another of employees

MBO Focuses on end goals; Time-consuming
results oriented

360° appraisal More thorough Time-consuming

EXHIBIT 6-8 Performance Appraisal Methods

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by the employee’s actual level of performance. The use of critical incidents focuses the
evaluator’s attention on critical or key behaviors. The appraiser writes down anecdotes
describing whatever the employee did that was especially effective or ineffective. The key
here is that specific behaviors are cited, not vaguely defined personality traits. One of the
oldest and most popular methods of appraisal is by graphic rating scales. This method lists
a set of performance factors such as quantity and quality of work, job knowledge, cooper-
ation, loyalty, attendance, honesty, and initiative. The evaluator then goes down the list and
rates each factor on an incremental scale. An approach that has received renewed attention
involves behaviorally anchored rating scales (BARS).28 These scales combine major
elements from the critical incident and graphic rating scale approaches. The appraiser rates
an employee according to items along a numerical scale, but the items are examples of
actual behavior on a given job rather than general descriptions or traits.29

Finally, an appraisal device that seeks performance feedback from such sources as the
person being rated, bosses, peers, team members, customers, and suppliers has become
popular in organizations. It’s called the 360-degree appraisal.30 It’s being used in approx-
imately 90 percent of Fortune 1000 firms, including such companies as Otis Elevator,
DuPont, Nabisco, Pf izer, ExxonMobil, Cook Children’s Health Care System, General
Electric, UPS, and Nokia.31

In today’s dynamic organizations, traditional performance evaluation systems may be
archaic.32 Downsizing has given supervisors greater responsibility and more employees who
report directly to them. Accordingly, it may be next to impossible for supervisors to have
extensive job knowledge of each of their employees. Furthermore, the growth of project
teams and employee involvement places the responsibility for evaluation where people are
better able to make accurate assessments.33

The 360-degree feedback process also has some positive benefits for development
concerns.34 Many managers simply do not know how their employees view them and the work
they have done. Research studies into the effectiveness of 360-degree performance appraisals
report positive results including more accurate feedback, empowering employees, reducing the
subjective factors in the evaluation process, and developing leadership in an organization.35

SHOULD PEOPLE BE COMPARED TO ONE ANOTHER OR AGAINST A SET OF STANDARDS?
The methods previously identified have one thing in common. They require us to evaluate
employees on the basis of how well their performance matches established or absolute
criteria. Multiperson comparisons, on the other hand, compare one person’s performance
with that of one or more individuals. These are relative, not absolute, measuring devices.

The three most popular forms of this method are group-order ranking, indi-
vidual ranking, and paired comparison.

The group-order ranking requires the evaluator to place employees into a
particular classification such as “top fifth” or “second fifth.” If a rater has
20 employees, only four can be in the top fifth, and, of course, four must be rele-
gated to the bottom fifth. The individual ranking approach requires the evaluator
to list the employees in order from highest to lowest. Only one can be “best.” In
an appraisal of 30 employees, the difference between the first and second
employee is assumed to be the same as that between the twenty-first and twenty-
second. Even though some employees may be closely grouped, no ties are allowed.
In the paired comparison approach, each employee is compared with every other
employee in the comparison group and rated as either the superior or weaker
member of the pair. After all paired comparisons are made, each employee is
assigned a summary ranking based on the number of superior scores he or she
achieved. Although this approach ensures that each employee is compared against
every other employee, it can become unwieldy when large numbers of employ-
ees are being assessed.

WHAT ABOUT MBO AS AN APPRAISAL APPROACH? We introduced man-
agement by objectives during our discussion of planning in Chapter 4.
However, MBO is also a mechanism for appraising performance.

At one time renowned for its excellent
customer service, Home Depot had
fallen in customer satisfaction surveys to
one of the worst performing firms in the
retail industry. In repairing its damaged
reputation, Home Depot listed customer
service as its number one strategic
priority. One way that Home Depot is
implementing the customer focus is by
replacing its traditional performance
evaluation system with a system that
evaluates store employees almost
entirely on how well they treat
customers and satisfy their needs.

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Employees are evaluated by how well they accomplish a specific set of objectives that
are critical to the successful completion of their jobs. As you’ll recall from our discussion
in Chapter 4, these objectives need to be tangible, verifiable, and measurable. MBO’s pop-
ularity among managerial personnel is probably due to its focus on end goals. Managers
tend to emphasize such results-oriented outcomes as profit, sales, and costs. This emphasis
meshes with MBO’s concern with quantitative measures of performance. Because MBO
emphasizes ends rather than means, this appraisal method allows managers to choose the
best path for achieving their goals.

What Happens If an Employee’s Performance
Is Not Up to Par?
So far this discussion has focused on the performance management system. But what if an
employee is not performing in a satisfactory manner? What can you do?

If, for some reason, an employee is not meeting his or her performance goals, a man-
ager needs to find out why. If it’s because the employee is mismatched for the job (a hir-
ing error) or because he or she does not have adequate training, the f ix is relatively
simple. The manager can either reassign the individual to a job that better matches his
or her skills or train the employee to do the job more effectively. If the problem is asso-
ciated with an employee’s lack of desire to do the job, not with his or her abilities, it
becomes a discipline problem. In that case, a manager can try counseling and, if neces-
sary, take disciplinary action such as verbal and written warnings, suspensions, and even
terminations.

Employee counseling is a process designed to help employees overcome perform-
ance-related problems. Rather than viewing the performance problem from a punitive
standpoint (discipline), employee counseling attempts to uncover why employees have lost
their desire or ability to work productively. More importantly, it’s designed to find ways to
fix the problem. In many cases, employees don’t go from being productive one day to being
unproductive the next. Rather, the change happens gradually and may be a function of
what’s occurring in their personal lives. Employee counseling attempts to assist employ-
ees in getting help to resolve whatever is bothering them. The premise behind employee
counseling is fairly simple: It’s beneficial to both the organization and the employee. Just
as it’s costly to have an employee quit shortly after being hired, it’s costly to fire someone.
The time spent recruiting and selecting, orienting, training, and developing employees
translates into money. If, however, an organization can help employees overcome personal
problems and get them back on the job quickly, it can avoid these costs. But make no mis-
take about it, employee counseling is not intended to lessen the effect of an employee’s
poor performance, nor is it intended to reduce his or her responsibility to change inappro-
priate work behavior. If the employee can’t or won’t accept help, then disciplinary actions
must be taken.

How Are Employees Compensated?
Executives at Discovery Communications Inc. had an employee morale problem on their
hands. Many of the company’s top performers were making the same salaries as the poorer
performers, and the company’s compensation program didn’t allow for giving raises to peo-
ple who stayed in the same position. The only way for managers to reward the top perform-
ers was to give them a bonus or promote them to another position. Executives were
discovering that not only was that unfair, it was counterproductive. So they overhauled the
program.37

360-degree appraisal
An appraisal device that seeks feedback from
a variety of sources for the person being rated.

employee counseling
A process designed to help employees
overcome performance-related problems.

discipline
Actions taken by a manager to enforce an
organization’s standards and regulations.

percent of employees look
for a positive attitude when
hiring seasonal employees.

percent of layoff survivors
say that their individual
productivity has declined.

percent of managers rec-
ognize the value of hiring
people different from them-

selves and do what they can to meet
this goal.

percent of interviewers say
that the best way to “blow”
your interview is by not

learning about the job or organization.

percent of participants in
classroom training said that
e-learning was convenient;

90 percent viewed it as a time-saver.

percent of U.S. employees
say they’ve heard a sexually
inappropriate comment at

work.

39
75
50

34
percent of HR execu-
tives say their compa-
nies have frozen or cut

salaries to save money instead of firing
employees.

52.4

172 PA R T T H R E E | O R G A N I Z I N G

Although there are exceptions, most of us work for money. What our jobs pay and
what benef its we get fall under the heading of compensation and benef its. Determin-
ing levels of compensation isn’t easy. However, most of us expect to receive appropri-
ate compensation from our employer. Developing an effective and appropriate
compensation system is an important part of the HRM process.38 It can help attract and
retain competent and talented individuals who help an organization accomplish its mis-
sion and goals. In addition, an organization’s compensation system has been shown to
have an impact on its strategic performance.39 Managers must develop a compensation
system that reflects the changing nature of work and the workplace in order to keep
people motivated.

HOW ARE PAY LEVELS DETERMINED? How does management decide who gets paid
$15.85 an hour and who receives $325,000 a year? The answer lies in compensation
administration. The goals of compensation administration are to design a cost-effective
pay structure that will attract and retain competent employees and to provide an incentive
for these individuals to exert high energy levels at work. Compensation administration also
attempts to ensure that pay levels, once determined, will be perceived as fair by all employ-
ees. Fairness means that the established pay levels are adequate and consistent for the
demands and requirements of the job. Therefore, the primary determination of pay is the
kind of job an employee performs. Different jobs require different kinds and levels of
skills, knowledge, and abilities, and these factors vary in their value to the organization.
So, too, do the responsibility and authority of various positions. In short, the higher the
skills, knowledge, and abilities—and the greater the authority and responsibility—the
higher the pay.

So, how do managers determine who gets paid what? Several factors influence the com-
pensation and benefit packages that different employees receive. Exhibit 6-9 summarizes
these factors, which are job-based and business- or industry-based. One factor that’s criti-
cal is the organization’s philosophy toward compensation. Some organizations, for instance,

Level of
Compensation
and Benefits

Employee’s Tenure
and Performance

Size of
Company

Kind of
Job Performed

Company
Profitability

Kind of
Business

Geographical
Location

Unionization

Management
Philosophy

Labor or
Capital Intensive

How long has employee
been with company and

how has he or she performed?

Does job require
high levels of skills?

What industry is job in?

Is business unionized?

Is business labor or
capital intensive?

How large is the
company?

How profitable is the
company?

Where is organization
located?

What is management’s
philosophy toward pay?

EXHIBIT 6-9 What Determines Pay and Benefits?

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Published by Prentice Hall. Copyright © 2011 by Pearson Education, Inc.

C H A P T E R 6 | M A N A G I N G H U M A N R E S O U R C E S 173

compensation administration
The process of determining a cost-effective pay
structure that will attract and retain employees,
provide an incentive for them to work hard, and
ensure that pay levels will be perceived as fair.

employee benefits
Nonfinancial rewards designed to enrich
employees’ lives.

variable pay
A pay system in which an individual’s
compensation is contingent on performance.

skill-based pay
A pay system that rewards employees for the
job skills they demonstrate.

Discuss
contemporary
issues in
managing
human
resources.
6.5

don’t pay employees any more than they have to. In the absence of a union contract that
stipulates wage levels, those organizations only have to pay minimum wage for most of their
jobs. On the other hand, some organizations are committed to a compensation philosophy
of paying their employees at or above area wage levels in order to emphasize that they want
to attract and keep the best pool of talent.

Many organizations are using alternative approaches to determine compensation includ-
ing skill-based pay and variable pay. Skill-based pay systems reward employees for the job
skills and competencies they can demonstrate. Under this type of pay system, an employee’s
job title doesn’t define his or her pay category, skills do.40 Research shows that these types
of pay systems tend to be more successful in manufacturing organizations than in service
organizations and in organizations pursuing technical innovations.41 On the other hand, many
organizations use variable pay systems, in which an individual’s compensation is contin-
gent on performance—90 percent of U.S. organizations use variable pay plans, and 81 per-
cent of Canadian and Taiwanese organizations do.42

WHY DO ORGANIZATIONS OFFER EMPLOYEE BENEFITS? When an organization designs
its overall compensation package, it has to look further than just an hourly wage or annual
salary. It has to take into account another element, employee benefits, which are nonfinan-
cial rewards designed to enrich employees’ lives. They have grown in importance and vari-
ety over the past several decades. Once viewed as “fringes,” today’s benef it packages
reflect efforts to provide something that each employee values.

The benefits offered by an organization vary widely in scope. Most organizations are
legally required to provide Social Security and workers’ and unemployment compensation,
but organizations may also provide an array of benefits such as paid time off from work, life
and disability insurance, retirement programs, and health insurance.43 The costs of some of
these, such as retirement and health insurance benefits, may be paid by both the employer
and the employee, although as you’ll see in the next section, organizations are cutting back
or putting stipulations on these two costly benefits.

What Contemporary HRM Issues Face
Managers?
We’ll conclude this chapter by looking at several HR issues facing today’s
managers including downsizing, workforce diversity, sexual harassment,
workplace spirituality, and HR costs.

How Can Managers Manage Downsizing?
Downsizing is the planned elimination of jobs in an organization. Because down-
sizing typically involves shrinking the organization’s workforce, it’s an important issue in
HRM. (Take another look at the chapter-opening story.) When an organization has too many
employees—which may happen when it’s faced with an economic crisis, declining market
share, too aggressive growth, or when it’s been poorly managed—one option for improving
profits is to eliminate some of those excess workers. Over the last 18 months, many well-
known companies have gone through several rounds of downsizing—Boeing, Volkswagen,

downsizing
The planned elimination of jobs in an
organization.

Microsoft, Dell, General Motors, Unisys, Siemens, Merck, Toy-
ota, among others. How can managers best manage a downsized
workplace?

After downsizing, disruptions in the workplace and in
employees’ personal lives are to be expected. Stress, frustration,
anxiety, and anger are typical reactions of both individuals being
laid off and the job survivors. And it may surprise you to learn
that both victims and survivors experience those feelings.44 Many
organizations have done a fairly good job of helping layoff vic-
tims by offering a variety of job-help services, psychological
counseling, support groups, severance pay, extended health
insurance benefits, and detailed communications. Although
some individuals react negatively to being laid off (the worst
cases involve individuals returning to their former organization
and committing a violent act), the assistance offered reveals that
the organization does care about its former employees. The lay-
off victims get to start over with a clean slate and a clear con-
science. Survivors don’t. Unfortunately, too often, little is done
for the “survivors” who retain their jobs and have the task of
keeping the organization going or even of revitalizing it.

A new syndrome seems to be popping up in organizations:
layoff-survivor sickness, a set of attitudes, perceptions, and behav-
iors of employees who survive involuntary staff reductions.46

Symptoms include job insecurity, perceptions of unfairness, guilt,
depression, stress from increased workload, fear of change, loss of
loyalty and commitment, reduced effort, and an unwillingness to
do anything beyond the required minimum.

To address survivor syndrome, managers may want to pro-
vide opportunities for employees to talk to counselors about
their guilt, anger, and anxiety.47 Group discussions can also
provide an opportunity for the survivors to vent their feelings.

Some organizations have used downsizing as the spark to imple-
ment increased employee participation programs such as empowerment and self-man-
aged work teams. In short, to keep morale and productivity high, managers should make
every attempt to ensure that those individuals still working in the organization know that
they’re valuable and much-needed resources. Exhibit 6-10 summarizes some ways that
managers can reduce the trauma associated with downsizing.48

How Can Workforce Diversity Be Managed?
We’re discussing the changing makeup of the workforce in several places in this book,
mostly through our “Managing Diversity” boxes. But workforce diversity also affects such
basic HRM concepts as recruitment, selection, and orientation.49

174 PA R T T H R E E | O R G A N I Z I N G

• Communicate openly and honestly:

� Inform those being let go as soon as possible
� Tell surviving employees the new goals and expectations
� Explain impact of layoffs

• Follow any laws regulating severance pay or benefits

• Provide support/counseling for surviving employees

• Reassign roles according to individuals’ talents and backgrounds

• Focus on boosting morale:

� Offer individualized reassurance
� Continue to communicate, especially one-on-one
� Remain involved and available

EXHIBIT 6-10 Tips for Managing Downsizing

Right orWrong?

A report released by The Corporate Library says that many CEOs who vol-

untarily didn’t take their salary for a year or only took a $1 in pay were

actually well compensated.45 Such action by a CEO is usually intended

to convey concern and commitment, but in many cases, it may have been

largely a symbolic action. In 41 companies where the CEO had either no

base salary or a salary of $1 for the year and no cash bonus, 21 received

some form of “all other compensation.” In 18 instances of these “dollar

CEOs,” the individuals received a combined $6 billion in company stock

alone.What do you think of this? What do such actions convey to employ-

ees? To stockholders? To the general public?

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C H A P T E R 6 | M A N A G I N G H U M A N R E S O U R C E S 175

Improving workforce diversity requires managers to widen their recruiting net. For exam-
ple, the popular practice of relying on current employee referrals as a source of new job appli-
cants tends to produce candidates who have similar characteristics to those of present
employees. So managers have to look for applicants in places where they haven’t typically
looked before. To increase diversity, managers are increasingly turning to nontraditional
recruitment sources such as women’s job networks, over-50 clubs, urban job banks, disabled
people’s training centers, ethnic newspapers, and gay rights organizations. This type of outreach
should enable an organization to broaden its pool of applicants.

Once a diverse set of applicants exists, efforts must be made to ensure that the selec-
tion process does not discriminate. Moreover, applicants need to be made comfortable with
the organization’s culture and be made aware of management’s desire to accommodate their
needs. For instance, at TGI Friday’s, company managers work diligently to accommodate
differences and create workplace choices for a diverse workforce; so, too, do companies
such as Johnson & Johnson, Ernst & Young, Marriott International, IBM, and Bank of
America.50

Finally, orientation is often difficult for women and minorities. Many organizations,
such as Lotus and Hewlett-Packard, provide special workshops to raise diversity conscious-
ness among current employees as well as programs for new employees that focus on diver-
sity issues. The thrust of these efforts is to increase individual understanding of the
differences each of us brings to the workplace. A number of companies also have special
mentoring programs to deal with the reality that lower-level female and minority managers
have few role models with whom to identify.51

What Is Sexual Harassment?
Sexual harassment is a serious issue in both public and private sector organizations. More
than 12,000 complaints are filed with the EEOC each year,52 with more than 15 percent
of the complaints filed by males.53 Settlements in some of these cases incurred a substan-
tial cost to the companies in terms of litigation. It’s estimated that sexual harassment is
the single largest financial risk facing companies today—and can result in upward of a
30 percent decrease in a company’s stock price.54 At Mitsubishi, for example, the company
paid out more than $34 million to 300 women for the rampant sexual harassment to which
they were exposed.55 But it’s more than just jury awards. Sexual harassment results in
millions lost in absenteeism, low productivity, and turnover.56 Sexual harassment, further-
more, is not just a U.S. phenomenon. It’s a global issue. For instance, sexual harassment
charges have been filed against employers in such countries as Japan, Australia, Nether-
lands, Belgium, New Zealand, Sweden, Ireland, and Mexico.57 Even though discussions
of sexual harassment cases often focus on the large awards granted by a court, employers
face other concerns. Sexual harassment creates an unpleasant work environment for
organization members and undermines their ability to perform their jobs. But just what
is sexual harassment?

Any unwanted activity of a sexual nature that affects an individual’s employment can
be regarded as sexual harassment. It can occur between members of the opposite or of the
same sex—between employees of the organization or between employee and nonemployee.58

Although such an activity has been generally protected under Title VII (sex discrimination)
in the United States, in recent years this problem has gained more recognition. By most
accounts, prior to the mid-1980s, occurrences were generally viewed as isolated incidents,
with the individual committing the act being solely responsible (if at all) for his or her
actions.59 Since the beginning of the twenty-first century, however, charges of sexual harass-
ment have continued to appear in the headlines on an almost regular basis.

layoff-survivor sickness
A set of attitudes, perceptions, and behaviors
of employees who survive layoffs.

sexual harassment
Any unwanted action or activity of a sexual
nature that explicitly or implicitly affects an
individual’s employment, performance, or work
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Much of the problem associated with sexual harassment is determining what constitutes
this illegal behavior.60 In 1993, the EEOC cited three situations in which sexual harassment
can occur. In these instances, verbal or physical conduct toward an individual:

1. Creates an intimidating, offensive, or hostile environment.
2. Unreasonably interferes with an individual’s work.
3. Adversely affects an employee’s employment opportunities.

For many organizations, it’s the offensive or hostile environment issue that’s
problematic.61 What constitutes such an environment? Challenging hostile environment
situations gained much support from the Supreme Court case of Meritor Savings Bank v.
Vinson.62 This case stemmed from a situation in which Ms. Vinson initially refused the
sexual advances of her boss. However, out of fear of reprisal, she ultimately conceded. But
according to court records, it didn’t stop there. Vinson’s boss continued to harass Vinson,
subjecting her to severe hostility that affected her job.63 In addition to supporting hostile
environment claims, the Meritor case also identified employer liability; that is, in sexual
harassment cases, an organization can be held liable for sexual harassment actions by its
managers, employees, and even customers!64

Although the Meritor case has implications for organizations, how do organizational
members determine whether something is offensive? For instance, does sexually explicit
language in the office create a hostile environment? How about off-color jokes? Pictures
of women totally undressed? The answer is it could! It depends on the people in the organ-
ization and the environment in which they work. The point here is that we all must be
attuned to what makes fellow employees uncomfortable—and if we don’t know, then we
should ask! Organizational success will, in part, reflect how sensitive each employee is
toward another in the company. At DuPont, for example, the corporate culture and diver-
sity programs are designed to eliminate sexual harassment through awareness and respect
for all individuals.65 It means understanding one another and, most importantly, respecting
others’ rights. Similar programs exist at FedEx, General Mills, and Levi-Strauss, among
other companies.

If sexual harassment carries with it potential costs to the organization, what can a com-
pany do to protect itself?66 The courts want to know two things—did the organization know
about, or should it have known about, the alleged behavior? And what did managers do to
stop it?67 With the number and dollar amounts of the awards today, it’s even more important
for organizations and managers to educate all employees on sexual harassment matters and
to have mechanisms available to monitor employees. Furthermore, “victims” no longer have

to prove that their psychological well-being is seriously affected.
The U.S. Supreme Court ruled in 1993, in the case of Harris v.
Forklift Systems, Inc., that victims do not have to suffer substantial
mental distress to receive a jury award. Furthermore, in June 1998,
the Supreme Court ruled that sexual harassment may have occurred
even if the employee had not experienced any “negative” job reper-
cussions. In this case, Kimberly Ellerth, a marketing assistant at
Burlington Industries, filed harassment charges against her boss
because he “touched her, suggested she wear shorter skirts, and told
her during a business trip that he could make her job ‘very hard or
very easy.’” When Ellerth refused, the harasser never “punished”
her; in fact, she even received a promotion during the time the
harassment was ongoing. What the Supreme Court’s decision in this
case indicates is that “harassment is defined by the ugly behavior of
the manager, not by what happened to the worker subsequently.”68

Finally, in a sexual harassment matter, managers must remem-
ber that the harasser may have rights, too.69 No action should be
taken against someone until a thorough investigation has been con-
ducted. Furthermore, the results of the investigation should be
reviewed by an independent and objective individual before any
action against the alleged harasser is taken. Even then, the harasser
should be given an opportunity to respond to the allegation and have

Orientation training for cadets of the
United States Air Force Academy
emphasizes the academy’s zero-
tolerance policy for assault and
harassment misconduct. Recognizing
that the academy fostered a culture
and climate that tolerated sexual
assault and harassment, an Air Force
team was formed to identify weak
points that needed correction and
to recommend ways to improve the
environment. Changes made based on
the recommendations include the
establishment of clear sexual-assault and
harassment reporting procedures and
formation of a new academy response
team to review alleged offenses.

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a disciplinary hearing if desired. Additionally, an avenue for appeal should also exist for the
alleged harasser—an appeal heard by someone at a higher level of management who is not
associated with the case.

What Is Workplace Spirituality?
What do organizations such as Southwest Airlines, Tom’s of Maine, Herman Miller, or
Hewlett-Packard have in common? Among other characteristics, they’re among a growing
number of organizations that have embraced workplace spirituality.

Workplace spirituality is not about organized religious practices.70 It’s not about
theology or about one’s spiritual leader. Rather, workplace spirituality is about recogniz-
ing that employees have an inner life that nourishes and is nourished by meaningful work
that takes place in the context of an organizational community.71 Organizations that
promote a spiritual culture recognize that employees have both a mind and a spirit, seek to
find meaning and purpose in their work, and desire to connect with other employees and
be part of a community.

WHY THE EMPHASIS ON SPIRITUALITY IN TODAY’S ORGANIZATIONS? Historical man-
agement models had no room for spirituality.72 These models typically focused on organi-
zations that were efficiently run without feelings toward others. Similarly, concern about
an employee’s inner life had no role in managing organizations. But just as we’ve come to
realize that the study of emotions improves our understanding of how and why people act
the way they do in organizations, an awareness of spirituality can help one better under-
stand employee work behavior in the twenty-first-century organization.

WHAT DOES A SPIRITUAL ORGANIZATION LOOK LIKE? The concept of spirituality draws on
the ethics, values, motivation, work/life balance, and leadership elements of an organization.
Spiritual organizations are concerned with helping employees develop and reach their full
potential. They’re also concerned with addressing problems created by work/life conflicts.

What differentiates spiritual organizations from their nonspiritual counterparts?
Although research is fairly new in this arena, several characteristics tend to be associated
with a spiritual organization.73 We list them in Exhibit 6-11.

workplace spirituality
A spiritual culture where organizational values
promote a sense of purpose through
meaningful work that takes place in the context
of community.

CHARACTERISTIC DESCRIPTION

Strong sense of purpose Organizational members know why the organization exists
and what it values.

Focus on individual Employees are valuable and need to be nurtured to help
development them grow; this characteristic also includes a sense of

job security.

Trust and openness Organizational member relationships are characterized by
mutual trust, honesty, and openness.

Employee empowerment Employees are allowed to make work-related decisions that
affect them, highlighting a strong sense of delegation of
authority.

Toleration of employee The organizational culture encourages employees to be
expression themselves and to express their moods and feelings without

guilt or fear of reprimand.

EXHIBIT 6-11 Characteristics of a Spiritual Organization

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Although workplace spirituality has generated some interest in many organizations, it’s
not without its critics. Those who argue against spirituality in organizations typically focus
on two issues. First is the question of legitimacy. Specifically, do organizations have the
right to impose spiritual values on their employees? Second is the question of economics.
Are spirituality and profits compatible? Let’s briefly look at these issues.

The potential for an emphasis on spirituality to make some employees uneasy is clear.
Critics argue that organizations have no business imposing spiritual values on employees.
This criticism is undoubtedly valid when spirituality is defined as bringing religion and God
into the workplace.74 However, the criticism appears less stinging when the goal is limited
to helping employees find meaning in their work lives.

The issue of whether spirituality and profits are compatible goals is certainly relevant
for anyone in business. The evidence, although limited, indicates that the two may be com-
patible. Several studies show that organizations that have introduced spirituality into the
workplace have witnessed improved productivity, reduced turnover, greater employee sat-
isfaction, and increased organizational commitment.75

WHAT DOES HRM HAVE TO DO WITH SPIRITUALITY? Ironically, introducing spirituality
into the organization is nothing new for HR. In actuality, many of the areas that HRM
addresses, and has done so for many years, are many of the same things that support spiri-
tuality.76 For instance, matters such as work/life balances, proper selection of employees,
setting performance goals, and rewarding people for the work they do, are all components
of making the organization more “spiritual.” In fact, as you review the characteristics of a
spiritual organization, in every case, HRM is either the leader in making such things hap-
pen, or is the vehicle by which the organization helps employees understand their respon-
sibilities and offers the requisite training to make things happen. In the end, it’s HRM that
will make the workplace a supportive work environment, one where communication
abounds and employees feel free to express themselves.

How and Why Are Organizations Controlling HR Costs?
HR costs are skyrocketing, especially those associated with employee health care and
employee pensions. Organizations are looking for ways to control these costs.

WHAT ABOUT EMPLOYEE HEALTH CARE COSTS? Employees at Aetna can earn financial
incentives up to $345 a year for participating in weight-management and fitness classes.
Some 80 percent of employees at Fairview Health Services in Minneapolis participate in a
comprehensive health-management program. Employees of King County in Seattle get
health insurance discounts if they do not smoke, are not overweight, and do not speed when
driving. At Alaska Airlines, employees must abide by a no-smoking policy, and new hires
must submit to a urine test to prove they’re tobacco-free.77 All these examples illustrate how
companies are trying to control skyrocketing employee health care costs. Since 2002, health
care costs have risen an average of 15 percent a year and are expected to double by the year
2016 from the $2.2 trillion spent in 2007.78 And smokers cost companies even more—about
25 percent more for health care than nonsmokers do.79 However, the biggest health care cost
for companies is obesity—an estimated $45 billion a year in medical expenditures and
absenteeism.80 A study of manufacturing organizations found that presenteeism, which is
defined as employees not performing at full capacity, was 1.8 percent higher for workers
with moderate to severe obesity than for all other employees.81 The reason for the lost
productivity is likely the result of reduced mobility because of body size or pain problems
such as arthritis. Is it any wonder that organizations are looking for ways to control their
health care costs? How? First, many organizations are providing opportunities for employ-
ees to lead healthy lifestyles. From financial incentives to company-sponsored health and
wellness programs, the goal is to limit rising health care costs. About 41 percent of compa-
nies use some type of positive incentives aimed at encouraging healthy behavior, up from
34 percent in 1996.82 Another recent study indicated that nearly 90 percent of companies

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ApplicationsReview and

Chapter Summary

C H A P T E R 6 | M A N A G I N G H U M A N R E S O U R C E S 179

surveyed planned to aggressively promote healthy lifestyles to their employees during the
next three to five years.83 Many are starting sooner: Google, Yamaha Corporation of
America, Caterpillar, and others are putting health food in company break rooms, cafeterias,
and vending machines; providing deliveries of fresh organic fruit; and putting “calorie
taxes” on fatty foods.84 In the case of smokers, however, some companies have taken a more
aggressive stance by increasing the amount smokers pay for health insurance or by firing
them if they refuse to stop smoking.

WHAT ABOUT EMPLOYEE PENSION PLAN COSTS? The other area where organizations are
looking to control costs is employee pension plans. Corporate pensions have been around
since the nineteenth century.85 But the days when companies could afford to give employees
a broad-based pension that provided them a guaranteed retirement income have changed.
Pension commitments have become such an enormous burden that companies can no longer
afford them. In fact, the corporate pension system has been described as “fundamentally
broken.”86 It’s not just struggling companies that have eliminated employee pension plans.
Lots of reasonably sound companies—for instance, NCR, FedEx, Lockheed Martin, and
Motorola—no longer provide pensions. Even IBM, which closed its pension plan to new
hires in December 2004, told employees that their pension benefits would be frozen.87

Obviously, the pension issue is one that directly affects HR decisions. On the one hand,
organizations want to attract talented, capable employees by offering them desirable bene-
fits such as pensions. But on the other hand, organizations have to balance that with the
costs of providing such benefits.

the creation of job descriptions and job specifica-
tions. Then, if job needs are indicated, recruitment
involves attempts to develop a pool of potential job
candidates. Downsizing is used to reduce the labor
supply. Selection involves determining who is best
qualified for the job. Selection devices need to be both
reliable and valid. Managers may want to give poten-
tial employees a realistic job preview.

6.3 Explain how employees are provided with needed
skills and knowledge. New hires must be acclimated to
the organization’s culture and be trained and given the
knowledge to do the job in a manner consistent with the
organization’s goals. Orientation—job, work unit, and
organizational—provides new employees with informa-
tion to introduce them to the job. Training is used to help
employees improve their ability to perform on the job.

6.4 Describe strategies for retaining competent,
high-performing employees. Two HRM activities
that play a role in this are managing employee
performance and developing an appropriate
compensation and benefits program. Managing
employee performance involves establishing
performance standards and then appraising

6.1 Describe the key components of the human
resource management process and the important
influences on that process. The HRM process consists
of eight activities that will staff an organization with
competent, high-performing employees who are capable
of sustaining their performance level over the long term.
The first three HR activities involve employment plan-
ning and include recruitment, downsizing, and selection.
The next two steps involve helping employees adapt to
the organization and ensuring that their skills and knowl-
edge are kept current, and include the HR activities of
orienting and training. The last steps involve identifying
performance goals, correcting performance problems, and
helping employees sustain high levels of performance.
These are done using the HR activities of performance
appraisal, compensation and benefits, and safety and
health. The main influences on the HRM process are
legal although other environmental conditions such as
restructuring, downsizing, diversity, and so forth can
impact it as well.

6.2 Discuss the tasks associated with identifying and
selecting competent employees. The first task is
employment planning, which involves job analysis andIS

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Understanding the Chapter

1. How does HRM affect all managers?

2. Should an employer have the right to choose employ-
ees without governmental interference? Support your
position.

3. Some critics claim that corporate HR departments
have outlived their usefulness and are not there to
help employees but to shield the organization from
legal problems. What do you think? What benefits
are there to having a formal HRM process? What
drawbacks?

4. Do you think it’s ethical for a prospective employer to
delve into an applicant’s life by means of interviews,
tests, and background investigations? What if those
investigations involved looking at your Facebook page
or personal blogs? Explain your position.

To check your understanding of learning outcomes 6.1 – 6.5 , go to

mymanagementlab.com and try the chapter questions.

5. Discuss the advantages and drawbacks of the various
recruiting sources.

6. Discuss the advantages and drawbacks of the various
selection devices.

7. What are the benefits and drawbacks of realistic job
previews? (Consider this question from both the per-
spective of the organization and the perspective of a
potential employee.)

8. What, in your view, constitutes sexual harassment?
Describe how companies can minimize sexual harass-
ment in the workplace.

9. Research your chosen career by finding out what it’s
going to take to be successful in this career in terms
of education, skills, experience, and so forth. Write
a personal career guide that details this information.

performance to see if those standards have been met.
There are various performance appraisal techniques
managers can use. If an employee’s performance is
not up to par, managers need to assess why and take
action. Compensation and benefits programs can
help attract and retain competent and talented indi-
viduals. Managers have to determine who gets paid
what and what benefits will be offered.

6.5 Discuss contemporary issues in managing human
resources. Downsizing is the planned elimination of
jobs and must be managed from the perspective of

layoff victims and job survivors. Workforce diversity
must be managed through HRM activities including
recruitment, selection, and orientation. Sexual
harassment is a significant concern of organizations
and managers, which mean programs and mecha-
nisms must be in place to educate all employees
about it. Workplace spirituality involves attempts by
organizations to make work more meaningful to
employees. Finally, organizations are looking for
ways to control HR costs, especially health care costs
and pension costs.

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Published by Prentice Hall. Copyright © 2011 by Pearson Education, Inc.

C H A P T E R 6 | M A N A G I N G H U M A N R E S O U R C E S 181

Understanding Yourself

How Much Do I Know About HRM?
This scale measures how much you know about human resource management. Although
it assesses your knowledge of some key findings within the HRM field, there are many
other important things to know.

INSTRUMENT Below are a number of statements about research findings in human
resource management. For each statement, indicate whether you think it is true or false.

0 = False

1 = True

1. Most managers give employees lower performance appraisals than they objectively deserve. 0 1

2. Poor performers are generally more realistic about their performance than good performers are. 0 1

3. Despite the popularity of drug testing, there is no clear evidence that applicants
who score positive on drug tests are any less reliable or less productive employees. 0 1

4. Most people over-evaluate how well they perform on the job. 0 1

5. The most important determinant of how much training employees actually use on their jobs is how
much they learned during training. 0 1

6. The most valid employment interviews are designed around each candidate’s unique background. 0 1

7. Although there are “integrity tests” that try to predict whether someone will steal, be absent, or otherwise
take advantage of an employer, they don’t work well in practice because so many people lie on them. 0 1

8. On average, conscientiousness is a better predictor of job performance than is intelligence. 0 1

9. Most employees prefer to be paid on the basis of individual performance rather than on team
or organizational performance. 0 1

10. There is a positive relationship between the proportion of managers receiving organizationally
based pay incentives and company profitability. 0 1

Source: Based on S. L. Rynes, A. E. Colbert, and K. G. Brown, “HR Professionals’ Beliefs About Effective Human
Resource Practices: Correspondence Between Research and Practice,” Human Resource Management (Summer, 2002),
pp. 149–74.

SCORING KEY To score the measure, compare your answers to the correct answers,
which are as follows: (1) False, (2) False, (3) False, (4) True, (5) False, (6) False, (7) False,
(8) False, (9) True, and (10) True. Matches should be counted as one. Compute the
number of correct responses. Scores will range from zero (all responses incorrect) to
10 (all responses correct).

ANALYSIS AND INTERPRETATION If you didn’t achieve a high score, don’t worry just
yet. These questions were given to nearly 1,000 HR professionals in a variety of organi-
zations. These professionals had an average of 14 years of work experience in HRM.
How did they do? On some of the questions (such as, “Most managers give employees
lower performance appraisals than they objectively deserve”), the vast majority gave
the correct answer (which is false, by the way). On other questions, however, a much
smaller percentage gave the correct answer. For example, for the statement: “On aver-
age, conscientiousness is a better predictor of job performance than is intelligence,”
only 18 percent of the HR professionals gave the correct response (false)!

Why the discrepancies? There are several reasons. It could be that practicing HR pro-
fessionals are unaware of research findings, either because they don’t have time to read
academic journals (or textbooks), or because the journals are so technically complex that
it’s difficult to extract the main findings. It also could be that practicing professionals are
aware of the research findings but choose not to utilize them because of factors such as
political reasons, organizational inertia, or aversion to risk. In any event, closing the gap
between research and practice is likely to be beneficial, as research has indicated that
organizations that implement effective HRM practices perform better than those that don’t.

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FYIA (For Your Immediate Action)

Western Montana Power & Light

To: Sandra Gillies, Director of Human Resources
From: William Munroney, CEO

Re: Sexual Harassment

Sandra, I think we might have a problem. It appears that some of our employees aren’t

clear about the practices and actions that do or do not constitute sexual

harassment.

We can’t have any ambiguity or uncertainty about this, as you know. We need to

immediately develop a training program for all our employees and develop a workable

procedure to handle any complaints that might arise.

I want to make the issue of sexual harassment the primary topic at next month’s

executive board meeting. To facilitate discussion, I’d like for you to write a working

paper (no longer than two pages in length) describing (1) the content of an initial

two-hour employee workshop on sexual harassment and (2) an appropriate procedure

that all employees could follow if they believe that they have been the victims of sexual

harassment.

This fictionalized company and message were created for educational purposes only. It is not meant to reflect
positively or negatively on management practices by any company that may share this name.

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Published by Prentice Hall. Copyright © 2011 by Pearson Education, Inc.

CASE APPLICATION

Like many companies today, ScottsMiracle-Gro is facing the dilemma ofpersuading employees to take better
care of themselves without diminishing
employee morale or getting hit with
employee lawsuits. It’s on the leading edge
of companies looking to monitor and change
employee behavior. But sometimes that edge
can be razor sharp.

Scotts’ CEO Jim Hagedorn (in photo)
acknowledges that his company’s wellness program is controversial. In 2000, he, like many other CEOs, watched
as his company’s health care costs skyrocketed. No help was in sight from either the government or from the
health insurance industry, and the company’s employees were “bingeing on health care.” By February 2003,
workers’ health care insurance premiums had doubled and employee morale had plummeted. Following his
usual tell-it-like-it-is style, Hagedorn confronted the issue head-on with employees. He wanted them to know
what they were up against—20 percent of the company’s net profits were going to health care. The company’s
health-risk assessment showed that half of the 6,000 employees were overweight or morbidly obese and a quarter
of them smoked. After seeing a CNN program late one night where a doctor was arguing that employers needed
to get serious about employee obesity, smoking, and diabetes, Hagedorn knew what he had to do. Despite the
late hour, he immediately called his HR chief and told her that he wanted to ban smoking and tackle obesity.

Getting that done wasn’t so easy. The legal department worried that the plan might violate federal laws. Other
advisors told Hagedorn not to do it or that he was moving too fast. But he wasn’t easily dissuaded. He found a law
firm that helped determine that in 21 states (including the company’s home base in Ohio) it wasn’t illegal to hire and
fire people based on their smoking habits. Hagedorn also implemented a company-wide wellness program but real-
ized that he needed a third-party to run it so managers couldn’t discriminate against employees based on their health.

Today, Scotts’ employees are encouraged to take exhaustive health-risk assessments. Those who don’t, pay $40
a month more in premiums. All employees are assigned a health coach, who works closely with those who are
moderate to high risk. Those who don’t comply pay an additional $67 a month on top of the $40. Many employ-
ees find the policy “intrusive.” Hagedorn hasn’t budged. He’s adamant about bringing down health care costs and
getting employees all the help they need to be healthy and lead healthier lives. One employee who was fired on his
30th birthday because he failed a drug test for nicotine is suing the company. (The lawsuit is still proceeding
through the courts system.) However, another employee who was prodded by his health coach to see a doctor had
his life saved when surgeons found a 95 percent blockage in his heart that would have killed him within five days
without the stents that were inserted.

Discussion Questions

1. What do you think about Hagedorn’s approach to controlling employee health care costs? Do you agree with
it? Why or why not?

2. What benefits/drawbacks are there to this type of wellness program for (a) employees and (b) the company?

3. Research company wellness programs. What types of things are companies doing to encourage employee well-
ness? Are there any things that you found that you might recommend that Hagedorn implement? Describe.

Sources: L. Alderman, “Getting Healthy, with a Little Help from the Boss,” New York Times Online, May 23, 2009; P. B. Kavilanz, “Unhealthy
Habits Cost You More at Work,” CNNMoney.com, March 24, 2009; M. Freudenheim, “Seeking Savings, Employers Help Smokers Quit,” New York
Times Online, October 26, 2007; and M. Conlin, “Get Healthy or Else,” BusinessWeek, February 26, 2007, pp. 58–69.

183

BUSTED

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Published by Prentice Hall. Copyright © 2011 by Pearson Education, Inc.

The term career has several meanings. In popular usage, it can mean advancement (“she is
on a management career track”), a profession (“he has chosen a career in accounting”), or
a lifelong sequence of jobs (“his career has included 12 jobs in six organizations”). For our
purposes, we define a career as the sequence of work positions held by a person during his
or her lifetime. Using this definition, it’s apparent that we all have, or will have, a career.
Moreover, the concept is as relevant to unskilled laborers as it is to software designers or
physicians. But career development isn’t what it used to be!

What Was Career Development Like, Historically?
Although career development has been an important topic in management courses for years,
there have been some dramatic changes in the concept. Career development programs used
to be designed to help employees advance their work lives within a specific organization.
The focus of such programs was to provide employees the information, assessment, and
training needed to help them realize their career goals. Career development was also a way
for organizations to attract and retain highly talented people. This approach has all but
disappeared in today’s workplace. Now, organizations that have such traditional career
programs are few and far between. Downsizing, restructuring, and other organizational
adjustments have brought us to one significant conclusion about career development: You—
not the organization—will be responsible for designing, guiding, and developing your
own career.

What Is Career Development Like, Now?
This idea of increased personal responsibility for one’s career has been described as
a boundaryless career. The challenge is that there are few hard-and-fast rules to guide you.

One of the first decisions you have to make is career choice. The optimum choice is one
that offers the best match between what you want out of life and your interests, your abili-
ties and personality, and market opportunities. Good career choices should result in a series
of jobs that give you an opportunity to be a good performer, make you want to maintain your
commitment to your career, lead to highly satisfying work, and give you the proper balance
between work and personal life. A good career match, then, is one in which you are able to
develop a positive self-concept, to do work that you think is important, and to lead the kind
of life you desire. In a recent survey by Capital One Financial Corporation, 66 percent of
college graduates said that a comprehensive benefits package (including, for example, health
care, 401(k) program, child care, and domestic partner benefits) was the most important
factor in their job search. Starting salary ranked second at 64 percent, with job location

boundaryless career
When an individual takes personal responsibility
for his or her own career.

career
The sequence of work positions held by
a person during his or her lifetime.

185

Career Module
Building Your Career

186 PA R T T H R E E | O R G A N I Z I N G

ranked third at 60 percent. Today’s college grads are also looking to be rewarded or
compensated (with comp time or matching donations, for instance) for their volunteer and
philanthropic activities.

Once you’ve identified a career choice, it’s time to initiate the job search. However, we
aren’t going to get into the specifics of job hunting, writing a résumé, or interviewing
successfully, although those things are important. Let’s fast-forward through all that and
assume that your job search was successful. It’s time to go to work! How do you survive and
excel in your career?

How Can I Have a Successful Career?
What can you do to improve your chances for career success? You’re already doing the
most important thing: You’re getting a college education! It’s the surest way to increase your
lifetime earnings. Currently, the average high school graduate earns $27,915 a year. His or her
counterpart with a college degree earns $51,206. College graduates earn, on average, $800,000
more than high school graduates over their working career. Investing in your education and
training is one of the best investments you’ll make in your lifetime. What else can you do? Here
are some suggestions based on extensive research into career management:

Assess Your Personal Strengths and Weaknesses
Where do your natural talents lie? What can you do, relative to others, that gives you a compet-
itive advantage? Are you particularly good with numbers? Have strong people skills? Good
with your hands? Write better than most people? Everyone has some things that they do better
than others and some things where they’re weak. Play to your strengths.

Identify Market Opportunities
Where are tomorrow’s job opportunities? Regardless of your strengths, certain job categories
are likely to decline in the coming decades—for instance, bank tellers, small farmers, movie
projectionists, travel agents, and secretaries. In contrast, there are likely to be abundant
opportunities created by an increasingly aging society, continued emphasis on technology,
increased spending on education and training, and concern with personal security. This is
likely to create excellent opportunities for jobs in gerontological counseling, network
administration, training consultants, and security-alarm installers.

Take Responsibility for Managing Your Own Career
Historically, companies tended to assume responsibility for their employees’ careers.
Today, this is the exception rather than the rule. Employees are increasingly expected to
take responsibility for their own careers.

Think of your careers as your business and you’re its CEO. To survive, you have to
monitor market forces, head off competitors, and be ready to quickly take advantage of
opportunities when they surface. You have to protect your career from harm and position
yourself to benefit from changes in the environment.

Develop Your Interpersonal Skills
Interpersonal skills, especially the ability to communicate, top the list of almost every
employer’s “must have” skills. Whether it’s getting a new job or a promotion, strong
interpersonal skills are likely to give you a competitive edge.

Practice Makes Perfect
There’s an increasing amount of evidence indicating that super-high achievers aren’t
fundamentally different from the rest of us. They just work harder and smarter. It’s been
found, based on studies of world-class performers in music, sports, chess, science, and

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| C A R E E R M O D U L E 187

business, that people like Tiger Woods, Mozart, and Bill Gates put in about 10,000 hours
(or 10 years at 1,000 hours a year) of persistent, focused training and experience
before they hit their peak performance level. If you want to excel in any field, you should
expect to have to put in a lot of deliberate practice—consistently engaging in repeated
activity specifically designed to improve performance beyond your current comfort and
ability level.

Stay Up-to-Date
In today’s dynamic world, skills can become obsolete quickly. To keep your career on track,
you need to make learning a lifetime commitment. You should be continually “going to
school”—if not taking formal courses, then reading books and journals to ensure that you
don’t get caught with obsolete skills.

Network
Networking refers to creating and maintaining beneficial relationships with others in order to
accomplish your goals. It helps to have friends in high places. It also helps to have contacts
who can keep you informed of changes that are going on in your organization and in your
industry. Go to conferences. Maintain contact with former college friends and alumni.
Get involved in community activities. Cultivate a broad set of relationships. And in today’s
increasingly interconnected world, join online business networking groups like LinkedIn,
spoke, and Talkbiznow.

Stay Visible
Networking can increase your visibility. So, too, can writing articles in your professional
journals, teaching classes or giving talks in your area of expertise, attending conferences and
professional meetings, and making sure your accomplishments are properly promoted. You
increase your mobility and value in the marketplace by keeping visible.

Seek a Mentor
Employees with mentors are likely to have enhanced mobility, increased knowledge of the
organization’s inside workings, greater access to senior executives, increased satisfaction,
and increased visibility. For women and minorities, having mentors has been shown to be
particularly helpful in promoting career advancement and success.

Leverage Your Competitive Advantage
Develop skills that will give you a competitive advantage in the marketplace. Especially
focus on skills that are important to employers, skills that are scarce, and areas where you
have limited competition. Try to avoid a worst-case scenario: You have a job that anyone can
learn in 30 minutes. Remember that the harder it is for you to learn and develop a highly
prized skill, the harder it’ll also be for others to acquire it. Generally speaking, the more
training necessary to do a job and the fewer people who have that training, the greater your
security and influence.

Here’s an insight from many years as a student and a professor: To succeed in school,
you have to be a generalist and excel at everything. For instance, to earn a 4.0 GPA, you need
to be a star in English, math, science, geography, languages, etc. The “real world,” on the
other hand, rewards specialization. You don’t have to be good at everything. You just need
to be good at something that others aren’t and that society values. You can be lousy in math
or science and still be a very successful opera singer, artist, salesperson, or writer. You don’t
have to excel in English to be a computer programmer or electrician. The secret to life
success is identifying your comparative advantage and then developing it. And, as we’ve
noted previously, you need to invest approximately 10,000 hours in honing your skills to
achieve optimum proficiency.IS

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Don’t Shun Risks
Don’t be afraid to take risks, especially when you’re young and you don’t have much to
lose. Going back to school, moving to a new state or country, or quitting a job to start your
own business can be the decision that will set your life in a completely new direction. Great
accomplishments almost always require taking the path less traveled; and the road to
nowhere is paved with fears of the unknown.

It’s OK to Change Jobs
Past generations often believed “you don’t leave a good job.” That advice no longer applies.
In today’s fast-changing job market, staying put often only means that you’re staying behind.
Employers no longer expect long-term loyalty. And to keep your skills fresh, your income
increasing, and your job tasks interesting, it will be increasingly likely that you’ll need to
change employers.

Opportunities, Preparation, and Luck = Success
Successful people are typically ambitious, intelligent, and hardworking. But they are also
lucky. It’s not by happenchance that many of the biggest technology success stories—Bill
Gates and Paul Allen at Microsoft, Steve Jobs at Apple, Scott McNealy at Sun Microsystems,
Eric Schmidt at Novell and Goggle—were born in a narrow three-year period between June
1953 and March 1956. They were smart. They were interested in computers and technology.
But they were also lucky. They reached their teens and early 20s in 1975—at the dawn of
the personal computer age. Those people with similar interests and talents but born in the
mid-1940s were likely to have joined a firm like IBM out of college and been enamored with
mainframe computers. Had they been born in the early 1960s, they would have missed
getting in on the ground floor of the revolution.

Success is a matter of matching up opportunities, preparation, and luck. It’s been
suggested that few of us get more than a couple of special opportunities in our lifetime. If
you’re lucky, you will recognize those opportunities, have made the proper preparations,
and then act on them.

You can’t control when you were born, where you were born, your parents’ finances,
or the like. Those are the luck factors. But what you can control is your preparation and
willingness to act when opportunity knocks.

Sources: “Managing Your Career Module” based on: J. H. Greenhaus, V. M. Godstalk, and G. A. Callahan,
Career Management, 3rd ed. (Cincinnati, OH: South–Western, 2000); K. A. Ericsson, “Deliberate Practice and the
Modifiability of Body and Mind,” International Journal of Sports Psychology (January–March 2007), pp. 4–34; J.
P. Newport, “Mastery, Just 10,000 Hours Away,” Wall Street Journal, March 14–15, 2009, p. W6; “Capital One
Survey Highlights What Today’s College Graduates Want from Employers,” http://www.businesswire.com
(June 10, 2008); M. Gladwell, Outliers: The Story of Success (New York: Little, Brown, 2008); R. N. Boles,
What Color Is Your Parachute? 2009: A Practical Manual for Job-Hunters and Career-Changers (Berkeley, CA:
Ten Speed Press, 2009); D. E. Super and D. T. Hall, “Career Development: Exploration and Planning,” in M. R.
Rosenzweig and L.W. Porter (eds.), Annual Review of Psychology, vol. 29 (Palo Alto, CA: Annual Reviews, 1978),
p. 334; and M. B. Arthur and D. M. Rousseau, The Boundaryless Career: A New Employment Principle for
a New Organizational Era (New York: Oxford University Press, 1996).

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| C A R E E R M O D U L E 189

Understanding Yourself

How Confident Am I in My Abilities to Succeed?
As we indicated earlier, you have to work at being successful. One personal characteristic
that can affect your chances at being successful includes how confident you are in you
abilities to succeed.

INSTRUMENT Indicate the extent to which you agree or disagree with each of the
following statements using the scale below.

1 = Strongly disagree

2 = Disagree

3 = Neutral

4 = Agree

5 = Strongly agree

Source: T. A. Judge, E. A. Locke, C. C. Durham, and A. N. Kluger, “Dispositional Effects on Job and Life Satisfaction:
The Role of Core Evaluations,” Journal of Applied Psychology 83 (1998), pp. 17–34.

1. I am strong enough to overcome life’s struggles. 1 2 3 4 5

2. At root, I am a weak person. 1 2 3 4 5

3. I can handle the situations that life brings. 1 2 3 4 5

4. I usually feel that I am an unsuccessful person. 1 2 3 4 5

5. I often feel that there is nothing that I can do well. 1 2 3 4 5

6. I feel competent to deal effectively with the real world. 1 2 3 4 5

7. I often feel like a failure. 1 2 3 4 5

8. I usually feel I can handle the typical problems that come up in life. 1 2 3 4 5

SCORING KEY To score the measure, first reverse-code items 2, 4, 5, and 7 so that
1 = 5, 2 = 4, 3 = 3, 4 = 2, and 5 = 1. Then add up all your responses.

ANALYSIS AND INTERPRETATION Your score on this measure can range from 8 to 40.
The higher your score, the more confidence you have in yourself to be successful.
Confidence has an influence on many things we do. People who are confident have high
self-efficacy that generalizes across a variety of situations. They believe that they have
the capability to mobilize the motivation and resources required to perform successfully
on different tasks or in different jobs. Ultimately, this confidence translates into better
performance. Why? One reason is that successful individuals set more goals for
themselves, are more committed to their goals, and even persist in achieving their goals
in the face of failure. In fact, when individuals who are confident about themselves are
given negative feedback (say, by a supervisor), they respond by increasing their effort
and motivation. Perhaps not surprisingly, individuals with such positive self-concepts
are more satisfied with their jobs and obtain higher levels of career success.

If you don’t have a great deal of confidence in yourself, there are several ways to
increase it. One was is to simply gain experience with tasks that you are less confident
about. Another way is to watch someone else, such as a friend, perform the task. For
instance, if you don’t have confidence in your ability to hit a tennis ball, first observing
someone else do it is likely to boost your confidence. Finally, being persuaded by
someone else that you can do something (think motivational speaker) helps to increase
the efficacy of individuals to perform a given task.

le
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in
g

o
u

t
c

o
m

e
s

Managing
Change and
Innovation

CHAPTER

how to
manage

resistance to

change.

techniques
for stimulating

innovation.

what
managers

need to know
about

employee

stress.

organizational
change and

compare and
contrast views
on the change

process.

Describe

Explain

Define

Discuss

7.2

7.3

7.1

7.4

192

p.199

p.201

p.204

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Imagine lying as a patient in a hospital bed and being visited
by a 5-foot robot.1 You might attribute such a “vision” to too
many drugs or too little sleep. But in Methodist Hospital in
Houston, that 5-foot robot isn’t a vision. It’s real. The robot,
which looks like “an oversize carpet cleaner with a computer
monitor stuck on top,” visits patients, being guided remotely by
a patient’s doctor from a command center on another floor. With
this type of technology, especially in a critical care unit, a medical
team can do its rounds and “read” vital signs and “see” how
patients are doing without disturbing or distressing them.

Robots roaming hospital hallways aren’t the only technological advancements
transforming how medical centers and health care systems work. Radio-frequency ID tags keep
track of doctors, nurses, and pieces of equipment in real time, leading to faster emergency
response times. “Smart beds automatically transfer patients’ breathing and heart rates to their
charts,” quickly alerting nurses to potential or developing problems. And one of the biggest
technological changes is in medical records information keeping. Rather than having massive
numbers of paper-based files, health care organizations are moving toward completely digital
medical records. But the rate of change has been slow. Currently, only 1.5 percent of private
hospitals have a comprehensive electronic medical records system in all clinical units. Only
7.6 percent have a basic system in at least one unit. Yet, it’s a major change with significant
promise. “Putting patient records into digital form . . . can provide a wealth of information
about which treatments work and which don’t, and speed diagnosis and medical care.”

The investment that hospitals and other health care organizations are making in technology
has basically two goals: (1) to improve medical care and reduce error rates, and (2) to minimize
patient stress, which encourages healing. “Ironically, one of the most anticipated developments is
that technology will allow hospitals to keep people out of them.” The vice president of the inno-
vation and technology group at Kaiser Permanente’s Sidney R. Garfield Health Care Innovation
Center says, “By 2015, the home will be the hub of health care.” And such changes are already
taking place. In many rural areas of the United States where specialized medical care is scarce,
telemedicine is in place to cover the gaps. For instance, 31 hospitals in remote locations in
Michigan use robots, similar to the one described earlier, for diagnosis and follow-up. Robots are
even found in operating rooms—the “assembly line” of a health care system—just as they are in
other organization’s assembly lines, and for the same reasons: quality control and cost control.

In an industry where you’d expect up-to-date technology, the changes in the way health
care organizations do their work haven’t been occurring as rapidly as you might

think. However, technological changes will continue to transform the
industry and the organizations and the people who make it work.

191

Technology Transformers

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7.1

Define
organizational
change and

compare and
contrast views
on the change
process.
192

Structure
Authority relationships

Coordinating mechanisms
Job redesign

Spans of control

Technology
Work processes
Work methods

Equipment

People
Attitudes

Expectations
Perceptions

Behavior

EXHIBIT 7-1 Categories of Organizational Change

Change is a constant for organizations and thus for managers. Large companies, small

businesses, entrepreneurial start-ups, universities, hospitals, and even the military are changing

the way they do things. Although change has always been a part of the manager’s job, it’s

become even more so in recent years. And because change can’t be eliminated, managers

must learn how to manage it successfully. In this chapter, we’re going to look at organizational

change efforts, the ways that managers can deal with the stress that exists in organizations,

and how managers can stimulate innovation in their organizations.

What Is Change and How Do Managers
Deal with It?
If it weren’t for change, a manager’s job would be relatively easy. Planning
would be easier because tomorrow would be no different from today. The
issue of organizational design would be solved because the environment

would be free from uncertainty and there would be no need to adapt. Simi-
larly, decision making would be dramatically simplified because the outcome

of each alternative could be predicted with near pinpoint accuracy. It would
also simplify the manager’s job if competitors never introduced new products or

services, if customers didn’t make new demands, if government regulations were never
modified, if technology never advanced, or if employees’ needs always remained the same.
But that’s not the way it is.

Change is an organizational reality. Most managers, at one point or another, will have
to change some things in their workplace. We classify these changes as organizational
change, which is any alteration of an organization’s people, structure or technology.
(See Exhibit 7-1.) Let’s look more closely at each of these three areas.

Changing structure includes any alteration in authority relationships, coordination
mechanisms, degree of centralization, job design, or similar organization structure
variables. For instance, in previous chapters, we’ve mentioned that work process engineering,
restructuring, and empowering result in decentralization, wider spans of control, reduced
work specialization, and work teams. These structural components give employees the
authority and means to implement process improvements. For instance, the creation of work
teams that cut across departmental lines allows those people who understand a problem best
to solve that problem. In addition, cross-functional work teams encourage cooperative
problem solving rather than “us versus them” situations. All of these may involve some type
of structural change.

Changing technology encompasses modif ications in the way work is done or the
methods and equipment used. One organizational area, in particular, where managers deal
with changing technology is continuous improvement initiatives, which are directed at
developing flexible processes to support better-quality operations. Employees committed

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to continuous improvements are constantly looking for things to fix. Thus, work processes
must be adaptable to continual change and f ine-tuning. Such adaptability requires an
extensive commitment to educating and training workers. Employees need skills training
in problem solving, decision making, negotiation, statistical analysis, and team-building,
and they must be able to analyze and act on data. For example, Herman Miller, Inc., used
both technology and employee training to achieve its market-leading position in the
office furniture industry.2

Changes in people refer to changes in employee attitudes, expectations, perceptions,
or behaviors. The human dimension of change requires a workforce that’s committed to
quality and continuous improvement. Again, proper employee education and training are
needed, as is a performance evaluation and reward system that supports and encourages
those improvements. For example, successful programs put quality goals into bonus plans
for executives and incentives for employees.

Why Do Organizations Need to Change?
In Chapter 2 we pointed out that both external and internal forces constrain managers. These
same forces also bring about the need for change. Let’s briefly review these factors.

WHAT EXTERNAL FORCES CREATE A NEED TO CHANGE? The external forces that create
the need for organizational change come from various sources. In recent years, the
marketplace has affected firms such as AT&T and Lowe’s because of new competition.
AT&T, for example, faces competition from local cable companies and from free Internet
services such as Skype. Lowe’s, too, must now contend with a host of aggressive competi-
tors such as Home Depot and Menard’s. Government laws and regulations are also an impe-
tus for change. For example, when the Americans with Disabilities Act was signed into law,
thousands of businesses were required to widen doorways, reconfigure restrooms, and add
ramps. Even today, organizations continue to deal with the requirements of improving
accessibility for the disabled.

Technology also creates the need for organizational change. Our chapter opening case
perfectly illustrates how changing technology can impact organizations. The Internet has
changed the way we get information, how products are sold, and how we get our work done.
Technological advancements have created significant economies of scale for many
organizations. For instance, technology allows Scottrade to offer its clients the opportunity
to make online trades without a broker. The assembly line in many industries has also
undergone dramatic change as employers replace human labor with technologically advanced
mechanical robots. Also, the fluctuation in labor markets forces managers to initiate changes.
For example, the shortage of registered nurses in the United States has led many hospital
administrators to redesign nursing jobs and to alter their rewards and benefits packages for
nurses, as well as join forces with local universities to address the nursing shortage.

As the news headlines remind us, economic changes affect almost all organizations.
For instance, prior to the mortgage market meltdown, low interest rates led to significant
growth in the housing market. This growth meant more jobs, more employees hired, and
significant increases in sales in other businesses that supported the building industry.
However, as the economy soured, it had the opposite effect on the housing industry and other
industries as credit markets dried up and businesses found it difficult to get the capital they
needed to operate. And although it’s been almost a decade since 9/11, the airline industry is
still dealing with the organizational changes forced on them by increased security measures
and other environmental factors such as high fuel costs.

organizational change
Any alteration of an organization’s people,
structure, or technology.

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Developing Your Skill
About the Skill
Managers play an important role in organizational change.
That is, they often serve as a catalyst for the change—a
change agent. However, managers may find that change
is resisted by employees. After all, change represents ambi-
guity and uncertainty, or it threatens the status quo. How
can this resistance to change be effectively managed?
Here are some suggestions.5

Steps in Practicing the Skill
1 Assess the climate for change. One major factor in

why some changes succeed while others fail is the
readiness for change. Assessing the climate for change

involves asking several questions. The more affirmative
answers you get, the more likely it is that change efforts
will succeed. Here are some guiding questions:

a. Is the sponsor of the change high enough in the
organization to have power to effectively deal
with resistance?

b. Is senior management supportive of the change
and committed to it?

c. Do senior managers convey the need for change,
and is this feeling shared by others in the organi-
zation?

d. Do managers have a clear vision of how the
future will look after the change?

WHAT INTERNAL FORCES CREATE A NEED TO CHANGE? Internal forces can also create
the need for organizational change. These internal forces tend to originate primarily from
the internal operations of the organization or from the impact of external changes. (It’s also
important to recognize that these changes are a normal part of the organizational life cycle.)3

When managers redefine or modify an organization’s strategy, that action often intro-
duces a host of changes. For example, when Nokia brings in new equipment, that’s an
internal force for change. Because of this action, employees may face job redesign,
undergo training to operate the new equipment, or be required to establish new interaction
patterns within their work groups. Another internal force for change is that the composition
of an organization’s workforce changes in terms of age, education, gender, nationality, and
so forth. A stable organization in which managers have been in their positions for years
might need to restructure jobs in order to retain more ambitious employees by affording
them some upward mobility. The compensation and benefits systems might also need to
be reworked to reflect the needs of a diverse workforce and market forces in which certain
skills are in short supply. Employee attitudes, such as increased job dissatisfaction, may
lead to increased absenteeism, resignations, and even strikes. Such events will, in turn,
often lead to changes in organizational policies and practices.

Who Initiates Organizational Change?
Organizational changes need a catalyst. People who act as catalysts and assume the respon-
sibility for managing the change process are called change agents.4

Any manager can be a change agent. When we talk about organizational change, we
assume that it’s initiated and carried out by a manager within the organization. However,
the change agent could be a nonmanager—for example, an internal staff specialist or an
outside consultant whose expertise is in change implementation. For major systemwide
changes, an organization will often hire outside consultants to provide advice and
assistance. Because these consultants come from the outside, they offer an objective
perspective that insiders usually lack. However, the problem is that outside consultants may
not understand the organization’s history, culture, operating procedures, and personnel.
They’re also prone to initiating more drastic changes than insiders—which can be either a
benefit or a disadvantage—because they don’t have to live with the repercussions after the
change is implemented. In contrast, internal managers who act as change agents may be
more thoughtful (and possibly more cautious) because they must live with the conse-
quences of their actions (see “Developing Your Change Management Skill”).

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“white-water rapids” metaphor of change
A description of organizational change that
likens that change to a small raft navigating a
raging river.

“calm waters” metaphor of change
A description of organizational change that
likens that change to a large ship making a
predictable trip across a calm sea and
experiencing an occasional storm.

change agents
People who act as change catalysts and
assume the responsibility for managing the
change process.

C H A P T E R 7 | M A N A G I N G C H A N G E A N D I N N O VAT I O N 195

e. Are objective measures in place to evaluate the
change effort and have reward systems been
explicitly designed to reinforce them?

f. Is the specific change effort consistent with other
changes going on in the organization?

g. Are managers willing to sacrifice their personal
self-interests for the good of the organization as
a whole?

h. Do managers pride themselves on closely moni-
toring changes and actions by competitors?

i. Are managers and employees rewarded for
taking risks, being innovative, and looking for new
and better solutions?

j. Is the organizational structure flexible?
k. Does communication flow both down and up in

the organization?
l. Has the organization successfully implemented

changes in the past?
m. Are employees satisfied with and do they trust

management?
n. Is a high degree of interaction and cooperation

typical between organizational work units?
o. Are decisions made quickly and do they take into

account a wide variety of suggestions?
2 Choose an appropriate approach for managing

the resistance to change. In this chapter, six strategies
are suggested for dealing with resistance to change—
education and communication, participation, facilita-
tion and support, negotiation, manipulation and
co-optation, and coercion. Review Exhibit 7–3 (p. 200)
for the advantages and disadvantages and when it is
best to use them.

3 During the time the change is being implemented
and after the change is completed, communicate
with employees regarding what support you may
be able to provide. Your employees need to know
that you are there to support them during change

efforts. Be prepared to offer the assistance that may
be necessary to help them enact the change.

Practicing the Skill
Read through the following scenario. Write down some
notes about how you would handle the situation described.
Be sure to refer to the three suggestions for managing resist-
ance to change.

You’re the nursing supervisor at a community hospital
employing both emergency room and floor nurses.
Each of these teams of nurses tends to work almost
exclusively with others doing the same job. In your
professional reading, you’ve come across the con-
cept of cross-training nursing teams and giving them
more varied responsibilities, which in turn has been
shown to improve patient care while lowering costs.
You call the two team leaders, Sue and Scott, into
your office to discuss your plan to have the nursing
teams move to this approach. To your surprise,
they’re both opposed to the idea. Sue says she and
the other emergency room nurses feel they’re
needed in the ER, where they fill the most vital role in
the hospital. They work special hours when needed,
do whatever tasks are required, and often work in
difficult and stressful circumstances. They think the
floor nurses have relatively easy jobs for the pay they
receive. Scott, leader of the floor nurses team, tells
you that his group believes the ER nurses lack the
special training and extra experience that the floor
nurses bring to the hospital. The floor nurses claim
they have the heaviest responsibilities and do the
most exacting work. Because they have ongoing
contact with the patients and their families, they
believe they shouldn’t be pulled away from vital
floor duties to help ER nurses complete their tasks.
Now . . . what would you do?

How Does Organizational Change Happen?
We often use two metaphors to clarify the change process.6 The “calm waters” metaphor envisions
the organization as a large ship crossing a calm sea. The ship’s captain and crew know exactly
where they’re going because they’ve made the trip many times before. Change surfaces as the
occasional storm, a brief distraction in an otherwise calm and predictable trip. In the “white-water
rapids” metaphor, the organization is seen as a small raft navigating a raging river with uninter-
rupted white-water rapids. Aboard the raft are half a dozen people who have never worked together

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before, who are totally unfamiliar with the river, who are unsure of their eventual destination,
and who, as if things weren’t bad enough, are traveling at night. In the white-water rapids
metaphor, change is a natural state and managing change is a continual process.

These two metaphors present distinctly different approaches to understanding and
responding to change. Let’s take a closer look at each one.

WHAT IS THE “CALM WATERS” METAPHOR? Until recently, the “calm waters” metaphor
dominated the thinking of practicing managers and academics. The prevailing model for
handling change in such circumstances is best illustrated in Kurt Lewin’s three-step
description of the change process.7 (See Exhibit 7-2.)

According to Lewin, successful change requires unfreezing the status quo, changing to
a new state, and freezing the new change to make it permanent. The status quo can be
considered an equilibrium state. Unfreezing is necessary to move from this equilibrium. It
can be achieved in one of three ways:

� The driving forces, which direct behavior away from the status quo, can be increased.
� The restraining forces, which hinder movement from the existing equilibrium, can be

decreased.
� The two approaches can be combined.

Once the situation has been unfrozen, the change itself can be implemented. However,
the mere introduction of change doesn’t ensure that it will take hold. The new situation,
therefore, needs to be frozen so that it can be sustained over time. Unless this last step is
done, it’s likely that the change will be short-lived and employees will revert to the previ-
ous equilibrium state. The objective of freezing the entire equilibrium state, then, is to
stabilize the new situation by balancing the driving and restraining forces.

Note how Lewin’s three-step process treats change as a break in the organization’s
equilibrium state.8 The status quo has been disturbed, and change is necessary to establish
a new equilibrium state. This view might have been appropriate to the relatively calm
environment that most organizations faced in the 1950s, 1960s, and early 1970s, but the
calm waters metaphor is increasingly obsolete as a description of the kinds of “seas” that
current managers have to navigate. (See the “From the Past to the Present” box for more
information on Lewin and his organizational research.)

WHAT IS THE “WHITE-WATER RAPIDS” METAPHOR? Susan Whiting is chairman of
Nielsen Media Research, the company best known for its television ratings, which are
frequently used to determine how much advertisers pay for TV commercials. The media
research business isn’t what it used to be, however, as the Internet, video on demand, cell
phones, iPods, digital video recorders, and other changing technologies have made data

Unfreezing

Changing

Refreezing

EXHIBIT 7-2 The Three-Step Change Process

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From the Past to the Present• •
“There is nothing so practical as a good theory.”
“If you want truly to understand something, try to
change it.”

These two quotes by Kurt Lewin provide unique insights into who
he was and how he approached studying management.9

Lewin, who’s often called the father of modern social psychol-
ogy (a discipline that uses scientific methods to “understand and
explain how the thought, feeling, and behavior of individuals are
influenced by the actual, imagined, or implied presence of other
human beings”), made his name in management circles
through his studies of group dynamics. His approach was based
on the belief that “group behavior is an intricate set of symbolic
interactions and forces that not only affect group structure but
also modify individual behavior.”

One of his research studies that looked at modifying
family food habits during World War II provided new and
important insights into introducing change. He found that

“changes were more easily induced through group decision
making than through lectures and individual appeals.” So
what did this mean? His findings suggested that changes
would be more readily accepted when people felt they had
an opportunity to be involved in the change rather than when
they were simply asked or told to change. That’s an important
lesson for any manager, even today, to learn and apply.

Finally, another of Lewin’s major contributions was the
idea of force field analysis, a framework for looking at the
factors (forces) that influenced a situation. Those forces could
either be driving movement toward a goal or blocking move-
ment toward a goal. When you view this idea in terms of
managing change, you can see how this process also could
contribute to understanding the dynamics of what makes
change work and how managers can overcome resistance
to change; that is, increase the driving forces, decrease the
blocking forces, or both.

collection much more challenging. Whiting says, “If you look at a typical week I have, it’s
a combination of trying to lead a company in change in an industry in change.”10 That’s a
pretty accurate description of what change is like in our second change metaphor—white-
water rapids. It’s also consistent with a world that’s increasingly dominated by information,
ideas, and knowledge.11

To get a feeling of what managing change might be like in a white-water rapids
environment, consider attending a college that had the following rules: Courses vary in
length. When you sign up, you don’t know how long a course will run. It might go for
2 weeks or 30 weeks. Furthermore, the instructor can end a course at any time with no
prior warning. If that isn’t challenging enough, the length of the class changes each time
it meets: Sometimes the class lasts 20 minutes; other times it runs for 3 hours. And the
time of the next class meeting is set by the instructor during this class. There’s one more
thing. All exams are unannounced, so you have to be ready for a test at any time. To succeed
in this type of environment, you’d have to respond quickly to changing conditions.
Students who were overly structured or uncomfortable with change wouldn’t succeed.

DOES EVERY MANAGER FACE A WORLD OF CONSTANT AND CHAOTIC CHANGE? No, not
every manager faces such a world. However, the number who don’t is dwindling. The stability
and predictability of the calm waters metaphor don’t exist. Disruptions in the status quo are not
occasional and temporary, and they are not followed by a return to calm waters. Many managers
never get out of the rapids. Like Susan Whiting, described previously, they face constant forces
in the environment (external and internal) that bring about the need for organizational change.

HOW DO ORGANIZATIONS IMPLEMENT PLANNED CHANGES? We know that most changes
employees experience in an organization don’t happen by chance. Often managers make a
concerted effort to alter some aspect of the organization. Whatever happens—in terms of
structure or technology—ultimately affects organizational members. Efforts to assist organi-
zational members with a planned change are referred to as organization development (OD).

organization development (OD)
Efforts that assist organizational members with a
planned change by focusing on their attitudes
and values.

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Members of the Florida State University
football team participate in team-
building exercises before the beginning
of their season. To foster teamwork, the
players participate in several different
games before competing in a paint ball
competition. While strength and
conditioning exercises are important
aspects of players’ physical training,
team-building exercises are important for
increasing players’ trust and openness
toward one another and for developing
skills that contribute to positive
interpersonal relationships.

In facilitating long-term, organization-wide changes, OD focuses on constructively
changing the attitudes and values of organization members so that they can more readily
adapt to and be more effective in achieving the new directions of the organization.12 When
OD efforts are planned, organization leaders are, in essence, attempting to change the
organization’s culture.13 However, a fundamental issue of OD is its reliance on employee
participation to foster an environment in which open communication and trust exist.14 Persons
involved in OD efforts acknowledge that change can create stress for employees. Therefore,
OD attempts to involve organizational members in changes that will affect their jobs and
seeks their input about how the change is affecting them ( just as Lewin suggested).

Any organizational activity that assists with implementing planned change can be
viewed as an OD technique. However, the more popular OD efforts in organizations rely
heavily on group interactions and cooperation and include survey feedback, process
consultation, team-building, and intergroup development.

Survey feedback efforts are designed to assess employee attitudes about and percep-
tions of the change they are encountering. Employees are generally asked to respond to a
set of specific questions regarding how they view such organizational aspects as decision
making, leadership, communication effectiveness, and satisfaction with their jobs,
coworkers, and management.15 The data a change agent obtains are used to clarify prob-
lems that employees may be facing. As a result of this information, the change agent takes
some action to remedy the problems.

In process consultation, outside consultants help managers to perceive, understand,
and act on process elements with which they must deal.16 These elements might include,
for example, workflow, informal relationships among unit members, and formal commu-
nications channels. Consultants give managers insight into what is going on. It’s important
to recognize that consultants are not there to solve these problems. Rather, they act as
coaches to help managers diagnose the interpersonal processes that need improvement. If
managers, with the consultants’ help, cannot solve the problem, the consultants will often
help managers find experts who can.

Organizations are made up of individuals working together to achieve some goals.
Because organizational members must frequently interact with peers, a primary function of
OD is to help them become a team. Team-building is generally an activity that helps work
groups set goals, develop positive interpersonal relationships, and clarify the roles and
responsibilities of each team member. It’s not always necessary to address each area because
the group may be in agreement and understand what’s expected of it. The primary focus of
team-building is to increase members’ trust and openness toward one another.17

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Explain
how to

manage
resistance to

change.
7.2

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Whereas team-building focuses on helping a work group become more cohesive,
intergroup development attempts to achieve the same results among different work groups.
That is, intergroup development attempts to change attitudes, stereotypes, and perceptions
that one group may have toward another group. In doing so, better coordination among the
various groups can be achieved.

How Do Managers Manage Resistance
to Change?
Managers should be motivated to initiate change because they’re concerned
with improving their organization’s effectiveness. But change isn’t easy in
any organization. It can be disruptive and scary. Organizations, and people
within them, can build up inertia that causes them to resist any change, even
if the change might be beneficial. In this section, we review why people in
organizations resist change and what can be done to lessen that resistance.

Why Do People Resist Organizational Change?
It’s often said that most people hate any change that doesn’t jingle in their pockets. This
resistance to change is well documented.18 Why do people resist organizational change?
The main reasons include uncertainty, habit, concern over personal loss, and the belief that
the change is not in the organization’s best interest.19

Change replaces the known with uncertainty. No matter how much you may dislike
attending college (or certain classes), at least you know what’s expected of you. When you
leave college for the world of full-time employment, you’ll trade the known for the
unknown. Employees in organizations are faced with similar uncertainty. For example, when
quality control methods based on statistical models are introduced into manufacturing plants,
many quality control inspectors have to learn the new methods. Some may fear that they’ll
be unable to do so and may develop a negative attitude toward the change or behave poorly
if required to use them.

Another cause of resistance is that we do things out of habit. Every day when you go
to school or work you probably go the same way, if you’re like most people. We’re creatures
of habit. Life is complex enough—we don’t want to have to consider the full range of
options for the hundreds of decisions we make every day. To cope with this complexity, we
rely on habits or programmed responses. But when confronted with change, our tendency
to respond in our accustomed ways becomes a source of resistance.

The third cause of resistance is the fear of losing something already possessed. Change
threatens the investment you’ve already made in the status quo. The more that people
have invested in the current system, the more they resist change. Why? They fear losing
status, money, authority, friendships, personal convenience, or other economic benefits that
they value. This helps explain why older workers tend to resist change more than younger
workers since they generally have more invested in the current system and more to lose by
changing.

A final cause of resistance is a person’s belief that the change is incompatible with
the goals and interests of the organization. For instance, an employee who believes that a

team-building
Using activities to help work groups set goals,
develop positive interpersonal relationships, and
clarify the roles and responsibilities of each
team member.

process consultation
Using outside consultants to assess
organizational processes such as workflow,
informal intra-unit relationships, and formal
communication channels.

survey feedback
A method of assessing employees’ attitudes
toward and perceptions of a change.

intergroup development
Activities that attempt to make several work
groups more cohesive.

200 PA R T T H R E E | O R G A N I Z I N G

proposed new job procedure will reduce product quality can be expected to resist the
change. This type of resistance can actually be beneficial to the organization if expressed
in a positive way.

What Are Some Techniques for Reducing Resistance
to Organizational Change?
When managers see resistance to change as dysfunctional, what can they do? Several strate-
gies have been suggested in dealing with resistance to change. These approaches include
education and communication, participation, facilitation and support, negotiation, manipu-
lation and co-optation, and coercion. These tactics are summarized here and described in
Exhibit 7-3. Managers should view these techniques as tools and use the most appropriate
one depending on the type and source of the resistance.

Education and communication can help reduce resistance to change by helping
employees see the logic of the change effort. This technique, of course, assumes that much
of the resistance lies in misinformation or poor communication.

Participation involves bringing those individuals directly affected by the proposed
change into the decision-making process. Their participation allows these individuals to
express their feelings, increase the quality of the process, and increase employee commit-
ment to the final decision.

Facilitation and support involve helping employees deal with the fear and anxiety
associated with the change effort. This help may include employee counseling, therapy, new
skills training, or a short paid leave of absence.

Negotiation involves exchanging something of value for an agreement to lessen the
resistance to the change effort. This resistance technique may be quite useful when the
resistance comes from a powerful source.

Manipulation and co-optation refers to covert attempts to influence others about the
change. It may involve twisting or distorting facts to make the change appear more attractive.

Finally, coercion can be used to deal with resistance to change. Coercion involves the
use of direct threats or force against the resisters.

TECHNIQUE WHEN USED ADVANTAGE DISADVANTAGE

Education and When resistance is due Clear up misunderstandings May not work when mutual
communication to misinformation trust and credibility

are lacking

Participation When resisters have the Increase involvement Time-consuming; has
expertise to make a and acceptance potential for a poor
contribution solution

Facilitation and When resisters are fearful Can facilitate needed Expensive; no guarantee
support and anxiety ridden adjustments of success

Negotiation When resistance Can “buy” commitment Potentially high cost;
comes from a powerful opens doors for others
group to apply pressure too

Manipulation and When a powerful group’s Inexpensive, easy way Can backfire, causing
co-optation endorsement is needed to gain support change agent to lose

credibility

Coercion When a powerful group’s Inexpensive, easy way May be illegal; may
endorsement is needed to gain support undermine change

agent’s credibility

EXHIBIT 7-3 Techniques for Reducing Resistance to Change

percent of U.S. workers
blame a heavy workload
for forcing them to cancel

vacation plans.

percent of U.S. companies
and 66 percent of compa-
nies in the rest of the

world are planning to increase their
investment in innovation this year.

percent of companies use
customer satisfaction to
measure the success of

their innovations.

percent of working par-
ents say that their family
life is more challenging to

manage than their career.

percent of executives said
their companies were suc-
cessful in implementing a

major change effort.

percent of women think
women are better at mul-
titasking than men.

percent of men agreed that
women are better at multi-
tasking than men.

75
33

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7.3

Describe
what

managers
need to know

about
employee

stress.

C H A P T E R 7 | M A N A G I N G C H A N G E A N D I N N O VAT I O N 201

SYMPTOMS
OF

STRESS

Physical

Behavioral

Psychological

Job-related dissatisfaction,
tension, anxiety, irritability,

boredom, and
procrastination.

Changes in productivity, absenteeism, job
turnover, changes in eating habits, increased

smoking or consumption of alcohol, rapid
speech, fidgeting, and sleep disorders.

Changes in metabolism,
increased heart and

breathing rates, raised
blood pressure, headaches,

and potential of heart
attacks.

EXHIBIT 7-4 Symptoms of Stress

What Reaction Do Employees Have
to Organizational Change?
For many employees, change creates stress. A dynamic and uncertain
environment characterized by restructurings, downsizings, empowerment,
and personal-life matters has caused large numbers of employees to feel
overworked and “stressed out.” In this section, we’ll review specif ically
what is meant by the term stress, what the symptoms of stress are, what
causes stress, and what managers can do to reduce anxiety.

What Is Stress?
Stress is the adverse reaction people have to excessive pressure placed on them from
extraordinary demands, constraints, or opportunities.21 Stress isn’t always bad. Although
it’s often discussed in a negative context, stress can be positive, especially when it offers a
potential gain. For instance, functional stress allows an athlete, stage performer, or employee
to perform at his or her highest level at crucial times.

However, stress is more often associated with constraints and demands. A constraint
prevents you from doing what you desire; demands refer to the loss of something desired. When
you take a test at school or have your annual performance review at work, you feel stress
because you confront opportunity, constraints, and demands. A good performance review may
lead to a promotion, greater responsibilities, and a higher salary. But a poor review may keep
you from getting a promotion. An extremely poor review might lead to your being fired.

One other thing to understand about stress is that just because the conditions are right for
stress to surface doesn’t always mean it will. Two conditions are necessary for potential stress
to become actual stress.22 First, there must be uncertainty over the outcome, and second, the
outcome must be important.

What Are the Symptoms of Stress?
We see stress in a number of ways. For instance, an employee who is experiencing high
stress may become depressed, accident prone, or argumentative; may have difficulty
making routine decisions; may be easily distracted, and so on. As Exhibit 7-4 shows, stress

stress
The adverse reaction people have to excessive
pressure placed on them from extraordinary
demands, constraints, or opportunities.

202 PA R T T H R E E | O R G A N I Z I N G

symptoms can be grouped under three general categories: physical, psychological, and
behavioral. All of these can significantly affect an employee’s work.

Too much stress can also have tragic consequences. In Japan, there’s a stress pheno-
menon called karoshi (pronounced kah-roe-she), which is translated literally as “death
from overwork.” During the late 1980s, “several high-ranking Japanese executives still in
their prime years suddenly died without any previous sign of illness.”23 As public concern
increased, even the Japanese Ministry of Labour got involved, and it now publishes
statistics on the number of karoshi deaths. As Japanese multinational companies expand
operations to China, Korea, and Taiwan, it’s feared that the karoshi culture may follow.

What Causes Stress?
Stress can be caused by personal factors and by job-related factors called stressors. Clearly,
change of any kind—personal or job-related—has the potential to cause stress as it can
involve demands, constraints, or opportunities. Organizations have no shortage of factors
that can cause stress. Pressures to avoid errors or complete tasks in a limited time period,
changes in the way reports are filed, a demanding supervisor, and unpleasant coworkers are
a few examples. Let’s look at five categories of organizational stressors: task, role, and
interpersonal demands; organization structure; and organizational leadership.

Task demands are factors related to an employee’s job. They include the design of a
person’s job (autonomy, task variety, degree of automation), working conditions, and the
physical work layout. Work quotas can put pressure on employees when their “outcomes”
are perceived as excessive.24 The more interdependence between an employee’s tasks and the
tasks of others, the more potential stress there is. Autonomy, on the other hand, tends to
lessen stress. Jobs in which temperatures, noise, or other working conditions are dangerous
or undesirable can increase anxiety. So, too, can working in an overcrowded room or in a
visible location where interruptions are constant.

Role demands relate to pressures placed on an employee as a function of the particular
role he or she plays in the organization. Role conflicts create expectations that may be hard
to reconcile or satisfy. Role overload is experienced when the employee is expected to do
more than time permits. Role ambiguity is created when role expectations are not clearly
understood and the employee is not sure what he or she is to do.

Interpersonal demands are pressures created by other employees. Lack of social support
from colleagues and poor interpersonal relationships can cause considerable stress, espe-
cially among employees with a high social need.

Organization structure can increase stress. Excessive rules and an employee’s lack of
opportunity to participate in decisions that affect him or her are examples of structural vari-
ables that might be potential sources of stress.

Organizational leadership represents the supervisory style of the organization’s
managers. Some managers create a culture characterized by tension, fear, and anxiety.
They establish unrealistic pressures to perform in the short run, impose excessively tight

controls, and routinely fire employees who don’t meas-
ure up. This style of leadership flows down through
the organization and affects all employees.

Personal factors that can create stress include family
issues, personal economic problems, and inherent per-
sonality characteristics. Because employees bring their
personal problems to work with them, a full understand-
ing of employee stress requires a manager to be under-
standing of these personal factors.25 Evidence also
indicates that employees’ personalities have an effect on
how susceptible they are to stress. The most commonly
used labels for these personality traits are Type A and
Type B.

Type A personality is characterized by chronic feel-
ings of a sense of time urgency, an excessive competitive
drive, and difficulty accepting and enjoying leisure time.

Wang Zhiqian stands before the Airbus
A320 aircraft she will fly as the first female
pilot for Sichuan Airlines, a regional
Chinese carrier. As a commercial airline
pilot, Zhiqian has a career that ranks high
on the list of the most stressful jobs. Task
demands make commercial pilots’ jobs
very stressful because pilots are
responsible for the lives of their
passengers and crews every time they
fly. In the event of an emergency, pilots
must handle unexpected and rapidly
changing situations from poor weather
conditions to equipment malfunctions.

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Published by Prentice Hall. Copyright © 2011 by Pearson Education, Inc.

The opposite of Type A is Type B personality. Type Bs never
suffer from time urgency or impatience. Until quite recently, it
was believed that Type As were more likely to experience stress
on and off the job. A closer analysis of the evidence, however,
has produced new conclusions. Studies show that only the
hostility and anger associated with Type A behavior are actu-
ally associated with the negative effects of stress. And Type Bs
are just as susceptible to the same anxiety-producing elements.
For managers, what is important is to recognize that Type A
employees are more likely to show symptoms of stress, even if
organizational and personal stressors are low.

How Can Stress Be Reduced?
As mentioned earlier, not all stress is dysfunctional. Since stress
can never be totally eliminated from a person’s life, managers want
to reduce the stress that leads to dysfunctional work behavior.
How? Through controlling certain organizational factors to reduce
job-related stress, and to a more limited extent, offering help for
personal stress.

Things that managers can do in terms of job-related factors
begin with employee selection. Managers need to make sure that
an employee’s abilities match the job requirements. When
employees are in over their heads, their stress levels typically will
be high. A realistic job preview during the selection process can
minimize stress by reducing ambiguity over job expectations.
Improved organizational communications will keep ambiguity-
induced stress to a minimum. Similarly, a performance planning
program such as MBO will clarify job responsibilities, provide
clear performance goals, and reduce ambiguity through feedback.
Job redesign is also a way to reduce stress. If stress can be traced
to boredom or to work overload, jobs should be redesigned to increase challenge or to reduce
the workload. Redesigns that increase opportunities for employees to participate in decisions
and to gain social support also have been found to lessen stress.27 For instance, at U.K. phar-
maceutical maker GlaxoSmithKline, a team-resilience program in which employees can shift
assignments depending on people’s workload and deadlines has helped reduce work-related
stress by 60 percent.28

No matter what you do to eliminate organizational stressors, some employees will still
be “stressed out.” And stress from an employee’s personal life raises two problems. First, it’s
difficult for the manager to control directly. Second, there are ethical considerations. Specif-
ically, does the manager have the right to intrude—even in the most subtle ways—in an
employee’s personal life? If a manager believes it’s ethical and the employee is receptive,
there are a few approaches the manager can consider.

To help deal with these issues, many companies offer employee assistance and wellness
programs.29 These employer-sponsored programs are designed to assist employees in areas
where they might be having difficulties such as financial planning, legal matters, health,
fitness, or stress.30

C H A P T E R 7 | M A N A G I N G C H A N G E A N D I N N O VAT I O N 203

Right orWrong?

One in five companies offers some form of stress management program.26

Although such programs are available, many employees may choose not

to participate.They may be reluctant to ask for help, especially if a major

source of that stress is job insecurity. After all, there’s still a stigma asso-

ciated with stress. Employees don’t want to be perceived as being unable

to handle the demands of their job. Although they may need stress

management now more than ever, few employees want to admit that

they’re stressed.What can be done about this paradox? Do organizations

even have an ethical responsibility to help employees deal with stress?

role ambiguity
When role expectations are not clearly
understood.

stressors
Factors that cause stress.

role overload
Having more work to accomplish than time
permits.

role conflicts
Work expectations that are hard to satisfy.

Type B personality
People who are relaxed and easygoing and
accept change easily.

karoshi
A Japanese term that refers to a sudden death
caused by overworking.

Type A personality
People who have a chronic sense of urgency
and an excessive competitive drive.

Discuss
techniques

for stimulating
innovation.

7.4

204 PA R T T H R E E | O R G A N I Z I N G

Contemporary employee assistance programs (EAPs) are extensions of programs
that began in U.S. companies in the 1940s.31 Companies such as DuPont, Standard Oil,
and Kodak recognized that a number of their employees were experiencing problems
with alcohol. Formal programs were implemented on the company’s site to educate these
workers about the dangers of alcohol and to help them overcome their addiction. The
rationale for these programs, which still holds today, is getting a productive employee
back on the job as quickly as possible. An organization also can benefit in terms of a
return on investment. It’s estimated that U.S. companies spend almost $1 billion each year
on EAP programs. Studies suggest that most of these companies save up to $5 to $16 for
every EAP dollar spent.32 That’s a significant return on investment!

In addition to EAP, many organizations are implementing wellness programs. A wellness
program is designed to keep employees healthy.33 These programs vary and may focus on
such things as smoking cessation, weight control, stress management, physical fitness,
nutrition education, high-blood-pressure control, violence protection, work team problem
intervention, and so on.34 Wellness programs are designed to help cut employer health costs
and to lower absenteeism and turnover by preventing health-related problems.35

How Can Managers Encourage Innovation
in an Organization?
“The way you will thrive in this environment is by innovating—innovating
in technologies, innovating in strategies, innovating in business models.”36

That’s the message IBM’s CEO Sam Palmisano delivered to an audience
of executives at an innovation-themed leadership conference. And how true

it is! Success in business today demands innovation. Such is the rallying
cry of today’s managers! In the dynamic, chaotic world of global competition,

organizations must create new products and services and adopt state-of-the-art
technology if they’re going to compete successfully.37

What companies come to mind when you think of successful innovators? Maybe Sony
Corporation, with its MiniDisks, PlayStations, AIBO robot pets, Cyber-shot digital
cameras, and MiniDV Handycam camcorders. Maybe Toyota with its continual advance-
ments in product and manufacturing process designs. What’s the secret to the success of
these innovator champions? What can other managers do to make their organizations more
innovative? In the following pages, we’ll try to answer those questions as we discuss the
factors behind innovation.

How Are Creativity and Innovation Related?
Creativity refers to the ability to combine ideas in a unique way or to make unusual
associations between ideas.38 A creative organization develops unique ways of working or
novel solutions to problems. For instance, at Mattel, company officials introduced “Project
Platypus,” a special group that brings people from all disciplines—engineering, marketing,
design, and sales—and tries to get them to “think outside the box” in order to “understand
the sociology and psychology behind children’s play patterns.” To help make this kind of
thinking happen, team members embarked on such activities as imagination exercises,
group crying, and stuffed-bunny throwing. What does throwing stuffed bunnies have to do
with creativity? It’s part of a juggling lesson where team members tried to learn to juggle
two balls and a stuffed bunny. Most people can easily learn to juggle two balls but can’t let
go of that third object. Creativity, like juggling, is learning to let go—that is, to “throw the
bunny.”39 But creativity by itself isn’t enough. The outcomes of the creative process need
to be turned into useful products or work methods, which is defined as innovation. Thus,
the innovative organization is characterized by its ability to channel creativity into useful
outcomes. When managers talk about changing an organization to make it more creative,
they usually mean they want to stimulate and nurture innovation.

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Published by Prentice Hall. Copyright © 2011 by Pearson Education, Inc.

C H A P T E R 7 | M A N A G I N G C H A N G E A N D I N N O VAT I O N 205

What’s Involved in Innovation?
Some people believe that creativity is inborn; others believe that with training, anyone can
be creative. The latter group views creativity as a fourfold process consisting of perception,
incubation, inspiration, and innovation.40

Perception involves the way you see things. Being creative means seeing things from
a unique perspective. One person may see solutions to a problem that others cannot or will
not see at all. The movement from perception to reality, however, doesn’t occur instanta-
neously. Instead, ideas go though a process of incubation. Sometimes employees need to sit
on their ideas, which doesn’t mean sitting and doing nothing. Rather, during this incubation
period, employees should collect massive amounts of data that are stored, retrieved, studied,
reshaped, and finally molded into something new. During this period, it’s common for years
to pass. Think for a moment about a time you struggled for an answer on a test. Although
you tried hard to jog your memory, nothing worked. Then suddenly, like a flash of light, the
answer popped into your head. You found it! Inspiration in the creative process is similar.
Inspiration is the moment when all your efforts successfully come together.

Although inspiration leads to euphoria, the creative work isn’t complete. It requires an
innovative effort. Innovation involves taking that inspiration and turning it into a useful
product, service, or way of doing things. Thomas Edison is often credited with saying that
“Creativity is 1 percent inspiration and 99 percent perspiration.” That 99 percent, or the
innovation, involves testing, evaluating, and retesting what the inspiration found. It’s
usually at this stage that an individual involves others more in what he or she has been
working on. Such involvement is critical because even the greatest invention may be
delayed, or lost, if an individual cannot effectively deal with others in communicating and
achieving what the creative idea is supposed to do.

How Can a Manager Foster Innovation?
The systems model (inputs � transformation process � outputs) can help us understand
how organizations become more innovative.41 If an organization wants innovative products
and work methods (outputs), it has to take its inputs and transform them into those outputs.
Those inputs include creative people and groups within the organization. But as we said
earlier, having creative people isn’t enough. The transformation process requires having the
right environment to turn those inputs into innovative products or work methods. This “right”
environment—that is, an environment that stimulates innovation—includes three variables:
the organization’s structure, culture, and human resource practices. (See Exhibit 7-5.)

HOW DO STRUCTURAL VARIABLES AFFECT INNOVATION? Research into the effect of
structural variables on innovation shows f ive things.42 First, an organic-type structure
positively influences innovation. Because this structure is low in formalization, centraliza-
tion, and work specialization, it facilitates the flexibility and sharing of ideas that are
critical to innovation. Second, the availability of plentiful resources provides a key building
block for innovation. With an abundance of resources, managers can afford to purchase
innovations, can afford the cost of instituting innovations, and can absorb failures. Third,
frequent communication between organizational units helps break down barriers to innova-
tion.43 Cross-functional teams, task forces, and other such organizational designs facilitate
interaction across departmental lines and are widely used in innovative organizations.
Fourth, innovative organizations try to minimize extreme time pressures on creative activities

creativity
The ability to combine ideas in a unique way or
to make unusual associations between ideas.

wellness programs
Programs offered by organizations to help
employees prevent health problems.

employee assistance programs (EAPs)
Programs offered by organizations to help
employees overcome personal and health-
related problems.

innovation
The process of taking a creative idea and
turning it into a useful product, service, or
method of operation.

206 PA R T T H R E E | O R G A N I Z I N G

despite the demands of white-water rapids environments. Although time pressures may
spur people to work harder and may make them feel more creative, studies show that it
actually causes them to be less creative.44 Finally, studies have shown that an employee’s
creative performance was enhanced when an organization’s structure explicitly supported
creativity. Beneficial kinds of support included things like encouragement, open commu-
nication, readiness to listen, and useful feedback.45

HOW DOES AN ORGANIZATION’S CULTURE AFFECT INNOVATION? Innovative organiza-
tions tend to have similar cultures.46 They encourage experimentation; reward both
successes and failures; and celebrate mistakes. An innovative organization is likely to have
the following characteristics.

� Accept ambiguity. Too much emphasis on objectivity and specificity constrains
creativity.

� Tolerate the impractical. Individuals who offer impractical, even foolish, answers to
what-if questions are not stifled. What at first seems impractical might lead to innova-
tive solutions.

� Keep external controls minimal. Rules, regulations, policies, and similar organizational
controls are kept to a minimum.

� Tolerate risk. Employees are encouraged to experiment without fear of consequences
should they fail. Mistakes are treated as learning opportunities.

� Tolerate conflict. Diversity of opinions is encouraged. Harmony and agreement
between individuals or units are not assumed to be evidence of high performance.

� Focus on ends rather than means. Goals are made clear, and individuals are encouraged
to consider alternative routes toward meeting the goals. Focusing on ends suggests that
there might be several right answers to any given problem.

STIMULATE
INNOVATION

Structural Variables

• Organic Structures
• Abundant Resources
• High Interunit
Communication
• Minimal Time Pressure
• Work and Nonwork Support Human Resource Variables

• High Commitment to
Training and Development
• High Job Security
• Creative People

Cultural Variables

• Acceptance of Ambiguity
• Tolerance of the Impractical
• Low External Controls
• Tolerance of Risks
• Tolerance of Conflict
• Focus on Ends
• Open-System Focus
• Positive Feedback

EXHIBIT 7-5 Innovation Variables

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Fundamentals of Management: Essential Concepts and Applications, Seventh Edition, by Stephen P. Robbins, David A. DeCenzo, and Mary Coulter.
Published by Prentice Hall. Copyright © 2011 by Pearson Education, Inc.

C H A P T E R 7 | M A N A G I N G C H A N G E A N D I N N O VAT I O N 207

idea champions
Individuals who actively and enthusiastically
support new ideas, build support for, overcome
resistance to, and ensure that innovations are
implemented.

Innovation is paramount at Facebook,
and the company’s culture stimulates the
process of taking a creative idea and
turning it into useful products and
services. Like other innovative
organizations, Facebook encourages
experimentation and tolerance of
conflict and risk and keeps rules and
regulations at a minimum. The company
insists that employees act like pioneers,
asking questions no one has asked
before and identifying new opportunities.
At Facebook, part of the innovative
process involves cutting loose and having
fun, such as the employee shown here
taking a brief break from work to play.

� Use an open-system focus. Managers closely monitor the environment and respond to
changes as they occur. For example, at Starbucks, product development depends on
“inspiration field trips to view customers and trends.” Michelle Gass, now the
company’s executive vice president of marketing, “took her team to Paris, Düsseldorf,
and London to visit local Starbucks and other restaurants to get a better sense of local
cultures, behaviors, and fashions.” She says, “You come back just full of different ideas
and different ways to think about things than you would had you read about it in a
magazine or e-mail.”47

� Provide positive feedback. Managers provide positive feedback, encouragement, and
support so employees feel that their creative ideas receive attention. For instance, at
Research In Motion, Mike Lazaridis, president and co-CEO says, “I think we have a
culture of innovation here, and [engineers] have absolute access to me. I live a life that
tries to promote innovation.”48

WHAT HUMAN RESOURCE VARIABLES AFFECT INNOVATION? In this category, we find
that innovative organizations actively promote the training and development of their
members so their knowledge remains current; offer their employees high job security to
reduce the fear of getting f ired for making mistakes; and encourage individuals to
become idea champions, actively and enthusiastically supporting new ideas, building
support, overcoming resistance, and ensuring that innovations are implemented.
Research finds that idea champions have common personality characteristics: extremely
high self-confidence, persistence, energy, and a tendency toward risk taking. They also
display characteristics associated with dynamic leadership. They inspire and energize
others with their vision of the potential of an innovation and through their strong personal
conviction in their mission. They’re also good at gaining the commitment of others to
support their mission. In addition, idea champions have jobs that provide considerable
decision-making discretion. This autonomy helps them introduce and implement innova-
tions in organizations.49

Understanding the Chapter

1. Why is managing change an integral part of every
manager’s job?

2. Describe Lewin’s three-step change process. How is it
different from the change process needed in the white-
water rapids metaphor of change?

3. How are opportunities, constraints, and demands
related to stress? Give an example of each.

4. Organizations typically have limits to how much
change they can absorb. As a manager, what signs
would you look for that might suggest your organiza-
tion has exceeded its capacity to change?

5. Why is organization development planned change?
Explain how planned change is important for organi-
zations in today’s dynamic environment.

6. How do creativity and innovation differ? Give an
example of each.

7. Research information on how to be a more creative
person. Write down suggestions in a bulleted list format
and be prepared to present your information in class.

8. How does an innovative culture make an organization
more effective? Do you think an innovative culture
could ever make an organization less effective? Why
or why not?

9. When you find yourself experiencing dysfunctional
stress, write down what’s causing the stress, what
stress symptoms you’re exhibiting, and how you’re
dealing with the stress. Keep this information in a
journal and evaluate how well your stress reducers are
working and how you could handle stress better. Your
goal is to get to a point where you recognize that
you’re stressed and can take positive actions to deal
with the stress.

ApplicationsReview and

Chapter Summary

The symptoms of stress can be physical, psychologi-
cal, or behavioral. Stress can be caused by personal
factors and by job-related factors. To help employees
deal with stress, managers can address job-related
factors by making sure an employee’s abilities match
the job requirements, improve organizational communi-
cations, use a performance planning program, or
redesign jobs. Addressing personal stress factors is
trickier, but managers could offer employee counseling,
time management programs, and wellness programs.

7.4 Discuss techniques for stimulating innovation.
Creativity is the ability to combine ideas in a unique
way or to make unusual associations between ideas.
Innovation is turning the outcomes of the creative
process into useful products or work methods. An
innovative environment encompasses structural,
cultural, and human resource variables.

Important structural variables include an organic-
type structure, abundant resources, frequent communi-
cation between organizational units, minimal time
pressure, and support. Important cultural variables
include accept ambiguity, tolerate the impractical,
keep external controls minimal, tolerate risk, tolerate
conflict, focus on ends not means, use an open-system
focus, and provide positive feedback. Important
human resource variables include high commitment to
training and development, high job security, and
encouraging individuals to be idea champions.

7.1 Define organizational change and compare and
contrast views on the change process. Organizational
change is any alteration of an organization’s people,
structure, or technology. The “calm waters” metaphor of
change suggests that change is an occasional disruption in
the normal flow of events and can be planned and
managed as it happens using Lewin’s three-step change
process (unfreezing, changing, and freezing). The “white-
water rapids” view of change suggests that change is
ongoing, and managing it is a continual process.

7.2 Explain how to manage resistance to change. People
resist change because of uncertainty, habit, concern about
personal loss, and the belief that a change is not in the
organization’s best interests. Techniques for managing
resistance to change include education and communica-
tion (educating employees about and communicating to
them the need for the change), participation (allowing
employees to participate in the change process), facilita-
tion and support (giving employees the support they need
to implement the change), negotiation (exchanging
something of value to reduce resistance), manipulation
and co-optation (using negative actions to influence),
selecting people who are open to and accept change,
and coercion (using direct threats or force).

7.3 Describe what managers need to know about
employee stress. Stress is the adverse reaction
people have to excessive pressure placed on them from
extraordinary demands, constraints, or opportunities.

To check your understanding of learning outcomes 7.1 – 7.4 , go to

mymanagementlab.com and try the chapter questions.

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Fundamentals of Management: Essential Concepts and Applications, Seventh Edition, by Stephen P. Robbins, David A. DeCenzo, and Mary Coulter.
Published by Prentice Hall. Copyright © 2011 by Pearson Education, Inc.

C H A P T E R 7 | M A N A G I N G C H A N G E A N D I N N O VAT I O N 209

Understanding Yourself

Am I Burned Out?
Burnout is when you’ve reached an overwhelming level of chronic and long-term stress.
It can lead to exhaustion and diminished interest in activities, both work and personal. This
instrument was designed to provide insights into whether you’re suffering from burnout.

INSTRUMENT Respond to each of the 21 items using the following scale:

1 = Never

2 = Once in a while

3 = Rarely

4 = Sometimes

5 = Often

6 = Usually

7 = Always

How often do you have any of the following experiences?
1. Being tired 1 2 3 4 5 6 7

2. Feeling depressed 1 2 3 4 5 6 7

3. Having a good day 1 2 3 4 5 6 7

4. Being physically exhausted 1 2 3 4 5 6 7

5. Being emotionally exhausted 1 2 3 4 5 6 7

6. Being happy 1 2 3 4 5 6 7

7. Being “wiped out” 1 2 3 4 5 6 7

8. “Can’t take it anymore” 1 2 3 4 5 6 7

9. Being unhappy 1 2 3 4 5 6 7

10. Feeling run-down 1 2 3 4 5 6 7

11. Feeling trapped 1 2 3 4 5 6 7

12. Feeling worthless 1 2 3 4 5 6 7

13. Being weary 1 2 3 4 5 6 7

14. Being troubled 1 2 3 4 5 6 7

15. Feeling disillusioned and resentful 1 2 3 4 5 6 7

16. Being weak and susceptible to illness 1 2 3 4 5 6 7

17. Feeling hopeless 1 2 3 4 5 6 7

18. Feeling rejected 1 2 3 4 5 6 7

19. Feeling optimistic 1 2 3 4 5 6 7

20. Feeling energetic 1 2 3 4 5 6 7

21. Feeling anxious 1 2 3 4 5 6 7

SCORING KEY To calculate your burnout score, add up your score for items 3, 6, 19,
and 20. Then subtract that total from 32. To this number, add your direct scores for the
remaining 17 items. Finally, divide this combined number by 21.

ANALYSIS AND INTERPRETATION Your burnout score will be somewhere between 1 and
7. The higher your number, the closer you are to burnout. The authors claim that scores
below 3 indicate few signs of burnout. Scores between 3 and 4 suggest the need to examine
your work life and reevaluate priorities with the intent of making changes. If your score is
higher than 4, you are experiencing a number of signs associated with burnout. You need
to take some action to address your problems. Scores above 5 indicate an acute state,
requiring immediate professional attention.

Source: A. Pines and E. Aronson, “Why Managers Burn Out,” Sales & Marketing Management (February 1989), p. 38.

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FYIA (For Your Immediate Action)

Performance Pros

To: Tina Sanchez, HR Director
From: Aaron Scott, President

Subject: Employee Stress Management Program

Well, Tina, we’ve made it through the initial phases of our restructuring efforts. The

changes haven’t been easy on any of us. But we’ve still got a long way to go, and

that’s where I need your assistance. To help minimize the pressures on our

software developers and sales staff, I think we need to develop an employee stress

management program that we could implement immediately. Our finances are such

that we don’t have a lot of excess funds available to spend on fitness equipment,

so you’re going to have to work within that constraint. Could you put together a

brief (no more than one page) outline of what you think this program should

include? Also, note the benefits you think each of your suggestions would provide.

I’d like some time to review your suggestions over the weekend, so please get me

your report as soon as possible.

This fictionalized company and message were created for educational purposes only. It is not meant to reflect
positively or negatively on management practices by any company that may share this name.

IS
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1-256-14379-0
Fundamentals of Management: Essential Concepts and Applications, Seventh Edition, by Stephen P. Robbins, David A. DeCenzo, and Mary Coulter.
Published by Prentice Hall. Copyright © 2011 by Pearson Education, Inc.

CASE APPLICATION

Eighteen thousand expired cans of sardines. A complete McDonald’sMcHappy Land play set. Fifty garden gnomes. That’s just a sam-pling of some of the weird stuff that 1-800-GOT-JUNK? customers
have asked the uniformed people in the freshly scrubbed blue trucks to
haul away. Based in Vancouver, British Columbia, Brian Scudamore,
company founder and CEO says, “With a vision of creating the ‘FedEx’
of junk removal, I dropped out of university with just one year left to
become a full-time JUNKMAN! Yes, my father, a liver transplant sur-
geon, was not impressed to say the least.” By the end of 2008, however,
the company had over 340 franchises in the United States, Canada, and
Australia, and system-wide revenues of over $125 million.

Scudamore’s company has been described as a “curious hybrid”
that blends the old and new economies. Although its product—hauling
trash—has been done for hundreds of years, it relies heavily on sophis-
ticated information technology and has the kind of organizational
culture that most people associate with high-tech start-ups.

Information systems and technology have been important to the
company’s growth. Scudamore says, “It has allowed us to expand all over North America. Our system has made the
process easier.” The company’s call center does all the booking and dispatching for franchise partners. They also use
the proprietary intranet to access schedules, customer information, real-time reports, and so forth. Needless to say,
the company’s franchise partners tend to be pretty tech-savvy.

In addition, the company’s culture is a unique blend of fun and seriousness. There’s a quote posted in the head
office that says “It’s all about people.” And those four simple words sum up Scudamore’s philosophy: Find the
right people and treat them right. Since 2004, the company has been ranked by BC Business magazine as one of
the best companies to work for in British Columbia. Grizzly, Scudamore’s dog, comes to the office every day and
helps employees relieve stress by playing catch anytime, anywhere. Each morning at exactly 10:55, all employees
at headquarters meet for a five-minute huddle, where they share good news, announcements, metrics, and prob-
lems they’re encountering. Visitors to the office are also expected to join in. The open-concept floor plan encour-
ages communication among all levels of staff—from top to bottom, and embodies the importance of the team
environment.

Discussion Questions

1. Do you think 1-800-GOT-JUNK? faces more of a calm waters or white-water rapids environment? Explain.

2. What external and internal forces might create the need for the company to change? Be specific in describing these.

3. Using Exhibit 7-5, how could Brian Scudamore stimulate and nurture innovation at headquarters and with
company franchisees?

4. What could other organizations learn about managing change, stress, and innovation from 1-800-GOT-JUNK?

Sources: B. Scudamore, “All You Need Is Tough Love,” Profit, December 2008/January 2009, p. 19; “Best Places to Work,” BC Business, December
2008, p. 85; P. Severinson, “Interview with Launi Skinner,” BC Business, September 2008, pp. 155–156; J. Straczewski, “Turning Up the Heat: Seeking
a Solution to the Energy Price Squeeze,” Franchising World, September 2008, pp. 40–43; S. Kilcarr, “Small Players, Big Ideas,” Waste Age, September
2008, pp. 44–50; “Honor Roll,” Entrepreneur, July 2008, p. 100; J. Johnson, “1-800-Got Growth,” Waste News, June 9, 2008, p. 3; B. Scudamore,
“Changing of the Guard,” Profit, June 2008, p. 22; J. Hainsworth, The Associated Press, “Canadian Company Finds Treasure in People’s Trash,”
Springfield, Missouri News-Leader, April 24, 2006, p. 5B; and G. Stoller, “Rubbish Boy Turned Junk into His Career,” USA Today, June 13, 2005, p. 7B.