Chapter 1_ HRM

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3/28/24, 9:29 AM Chapter 1: Creating Value Through Human Resources | Human Resource Management, 3rd Edition https://learning.oreilly.com/library/view/human-resource-management/9781118582800/12_chapter01.html#c1 1/52 Chapter 1 Creating Value Through Human Resources A MANAGER'S PERSPECTIVE M IGUEL DISCONNECTS HIS PHONE AND BREATHES A SIGH OF RELIEF . T HE JOB OFFER IS EVERYTHING HE HOPED IT WOULD BE . H E IS PRETTY CERTAIN HE WILL ACCEPT THE AUDITOR POSITION IN A COUPLE OF DAYS, BUT HE WANTS TO DO A LITTLE MORE RESEARCH FIRST . T WO YEARS AGO MIGUEL TOOK HIS FIRST ACCOUNTING CLASS AND INSTANTLY KNEW WHAT HE WANTED TO DO FOR A CAREER . H E LOVES THE STRUCTURE AND LOGIC OF ACCOUNTING . P UTTING ALL THE NUMBERS IN THE RIGHT PLACE AND MAKING SURE THEY ADD UP GIVES HIM A SENSE OF ACCOMPLISHMENT . N OW HE JUST NEEDS TO BE SURE THAT HE IS JOINING THE RIGHT FIRM. As Miguel reflects back on his day of interviews with the firm, he recalls a number of insightful conversations. One thing that impresses him is the firm's strong reputation for excellence. In the last few years, he has seen many of his friends lose their jobs. Seeing their pain has steered Miguel toward business organizations that he feels are unlikely to have financial difficulties. He knows that profitability is one key to success. But why is the firm that is offering him a position so profitable? Of course, much of it has to do with the firm's excellent operating procedures. From everything he has learned, the firm is simply superior at meeting customer needs. According to some of the managers who interviewed him, being prof- itable helps the firm invest more money to improve working conditions. The firm also has a strong reputation for helping people in the commu- nity, which is very important to Miguel.

3/28/24, 9:29 AM Chapter 1: Creating Value Through Human Resources | Human Resource Management, 3rd Edition https://learning.oreilly.com/library/view/human-resource-management/9781118582800/12_chapter01.html#c1 2/52 Something that really attracts Miguel to the company is how they treated him during the job interviews. Sarah, a human resource staff member, told Miguel that he has already progressed farther than 90 percent of job applicants. Sarah also described how the company focuses on finding and keeping only the best employees. This makes Miguel feel good and leads him to believe he will have competent coworkers. The firm seems to have good human resource practices. It offers numerous training opportunities and pays above-market wages. Insurance benefits are much better than most competitors'. According to Sarah, the firm also emphasizes internal promotions, making it likely that Miguel will have an opportunity to be- come a manager. The firm also seems to have a strategic plan for dealing with important changes that are likely to occur both in the marketplace and among fu- ture employees. Cutting-edge technology allows the firm to keep up with constantly changing accounting rules and procedures. Now that he has received an offer, Miguel plans to discuss things with his parents and a friend who works for the firm. Unless something changes his mind, he plans to take the offer and is convinced that he has the potential for a great career with the firm. WHAT DO YOU THINK? Suppose you are listening to a conversation between Miguel and his par- ents. His parents make the following statements as they and Miguel discuss his decision about the job offer. Which of the statements do you think are true?

3/28/24, 9:29 AM Chapter 1: Creating Value Through Human Resources | Human Resource Management, 3rd Edition https://learning.oreilly.com/library/view/human-resource-management/9781118582800/12_chapter01.html#c1 3/52 Companies with good human resource practices have more satisfied workers. Companies with happy employees are more profitable. Companies lose money when they try to be good social and environmental citizens. Having a successful career in the future workplace will require young employees to work effectively with older people. Human resource specialists can provide critical information and support that helps make life better for employees. LEARNING OBJECTIVES After reading this chapter you should be able to: Explain how human resource management, from the organizational life-cycle and stakeholder perspectives, can facilitate organizational success. List the core functions of human resource management. Explain what human resource professionals do to help create successful organizations. Identify important labor trends that are affecting organizations and their human resource practices. Explain how effective human resource management requires a combination of strategic and functional perspectives. How Can Human Resource Management Make an Organization Effective? Human resource management focuses on people in organizations. Of course, people are a major component of any organization, so it follows that organizations with more productive employees tend to be more suc- cessful. Employee productivity increases when organizations hire and motivate employees effectively. In addition, good human resource prac-

3/28/24, 9:29 AM Chapter 1: Creating Value Through Human Resources | Human Resource Management, 3rd Edition https://learning.oreilly.com/library/view/human-resource-management/9781118582800/12_chapter01.html#c1 4/52 tices create more satisfied employees, who in turn work harder to satisfy customers. Human resource management The field of study and practice that focuses on people in organizations. One prosperous organization that traces much of its success to effective management of people is Trader Joe's. The chain now includes over 365 stores in more than 30 different states, but it began in the 1960s as three convenience stores seeking to survive the introduction of 7-Eleven. Seeing the difficulty of competing head-to-head with 7-Eleven, the founder—Joe Coulombe—decided to change Trader Joe's to a specialty store selling unique products. Trader Joe's has since become well known for providing foods and beverages that cannot be found in other stores. Products, which usually carry the store's own label, include gourmet and specialty foods such as soy ice-cream cookies, black rice, and stuffed salmon. Keeping prices low is one key to success for Trader Joe's. However, cus- tomers describe their shopping experience as something more than a simple hunt for bargains. Trader Joe's works hard to attract educated cus- tomers who develop a loyal relationship with the company. Many of these customers say they have fun shopping at Trader Joe's. They look forward to searching store aisles and finding interesting products. They also enjoy their interactions with helpful store employees dressed in casual Hawaiian shirts. The real key to success for Trader Joe's, then, seems to be finding and keeping great employees. What does Trader Joe's do to develop and maintain a productive work- force? Flexible job design certainly plays a role. Employees have a great deal of autonomy in determining how the store can best serve customers. Every employee is encouraged to sample products and make recommen- dations. Employees are free to tell customers when they don't like some- thing. Workers at Trader Joe's are not limited to performing certain tasks but help out wherever they are needed. Managers, for example, often sweep floors and stock shelves. Of course, not everyone would fit equally well into the job environment at Trader Joe's. Employee selection focuses on hiring people with person- alities that fit the productive and creative culture. Trader Joe's looks for employees who are upbeat, outgoing, and motivated by challenge. Employees also need a good sense of humor and a strong customer orientation. Convincing people to take jobs with Trader Joe's does not seem to be diffi- cult. The store has a reputation as a desirable place to work, and a large number of people apply whenever job openings are advertised. One rea- 1 2 3 4 5

3/28/24, 9:29 AM Chapter 1: Creating Value Through Human Resources | Human Resource Management, 3rd Edition https://learning.oreilly.com/library/view/human-resource-management/9781118582800/12_chapter01.html#c1 5/52 son people like to work at Trader Joe's is the company's compensation practices. Employees are paid substantially more than they could make doing similar jobs in other companies. Full-time crew members begin at salaries around $50,000. They receive health insurance and participate in an excellent retirement savings program, including a plan that contrib- utes over 15 percent of gross income to a tax-deferred retirement ac- count. Excellent pay not only helps get people interested in working at Trader Joe's but also helps ensure that employees will stay with the com- pany. Managers are almost always promoted from within the company, and few employees leave to work elsewhere. Both employees and customers see Trader Joe's as a successful company. It is a profitable company, with annual sales exceeding $8 billion. More important, Trader Joe's generates twice as many dollars in sales per square foot of store space as competitors such as Whole Foods. This prof- itability has helped the company expand the number of stores without taking on debt. Profits grew tenfold over a 10-year period. The success of Trader Joe's clearly illustrates how a company can thrive in difficult and changing times. Rather than giving up to a formidable competitor, Joe Coulombe identified an unmet need and created an orga- nization to fill that need. Human resource practices at Trader Joe's help attract and motivate employees who provide great customer service. Doing things differently from the competition, and doing them better, has created a culture where people like to go to work. Happy employees make shoppers happy. Building Strength Through HR T RADER J OE'S Trader Joe's is a privately owned chain of about 365 specialty grocery and wine stores. Human resource management at Trader Joe's builds competi- tive strength by Designing work to give people autonomy to complete tasks in creative ways. Identifying and hiring people who have fun, outgoing personalities. Providing high pay and excellent benefits to attract the best workers. Matching human resource practices with a competitive strategy of providing unique products. 6 7

3/28/24, 9:29 AM Chapter 1: Creating Value Through Human Resources | Human Resource Management, 3rd Edition https://learning.oreilly.com/library/view/human-resource-management/9781118582800/12_chapter01.html#c1 6/52 LEARNING OBJECTIVE 1 How Is Organizational Success Determined? As you begin studying human resource management, it is important to think about what you want to gain from your efforts. How can under- standing human resource management better prepare you for success in your upcoming career? The most basic answer is that human resource skills will help you hire, manage, and motivate employees more effec- tively. Clearly, human resource skills are useful not only to human re- source professionals but also to everyone who has responsibility for lead- ing and managing others. Furthermore, even if you don't plan to work ei- ther as a human resource specialist or as a manager, learning the con- cepts of human resource management will help you to understand why the places where you work do much of what they do. The goal of human resource management is, of course, to make organiza- tions more effective. Thus, a starting point for learning about the field of human resource management is to explore the concept of organizational success. We know that some organizations are more successful than oth- ers. Can differences in human resource management explain why? Most observers agree that Trader Joe's is a successful organization. This is supported by top rankings from publications such as Consumer Reports . But what exactly does it mean to say an organization is successful? Does it mean the organization makes a lot of money? Does it mean the organiza- tion makes the world a better place? Perhaps success is meeting the de- mands of different stakeholders, such as Trader Joe's recent agreement with a farmworker organization concerning employee fair treatment as part of tomato-growing practices. Maybe success simply means the orga- nization has been around for a long time. Because organizational success has many faces, each of these perspectives is partly true. Different view- points capture different meanings of success. Here, we briefly examine the meaning of organizational success from two perspectives—the life-cy- cle model and the stakeholder perspective—and consider how human re- source management plays a role in making organizations effective from each viewpoint. SUCCESS IN LIFE-CYCLE STAGES Think about success for you as an individual. Being successful now doesn't guarantee you will be successful in 10 years. Having just enough money to buy pizza and books may equal success when you are 20, for example, but probably isn't enough when you are 40. Similarly, the life- cycle approach to organizational success suggests that measures of effec- tiveness change as an organization grows. Twenty-five years ago, Trader Joe's was successful simply because it didn't close when 7-Eleven entered the market. Success today depends on expansion into a national chain. 8

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