Hr chapter 5 – Flashcards with Answers

organizations need a clear idea of the strengths and weaknesses of their existing internal labor force. They also must know what they want to be doing in the future—what size they want the organization to be, what products and services it should be producing, and so on. This knowledge helps them define the number and kinds of employees they will need.

The changes may include downsizing, training existing employees in new skills, or hiring new employees. These activities give a general view of HR planning. They take place in the human resource planning process shown in Figure 5.1 . The process consists of three stages: forecasting, goal setting and strategic planning, and program implementation and evaluation.

Forecasting The attempts to determine the supply of and demand for various types of human resources to predict areas within the organization where there will be labor shortages or surpluses

Forecasting The first step in human resource planning is forecasting, as shown in the top portion of Figure 5.1 . In personnel forecasting, the HR professional tries to determine the supply of and demand for various types of human resources. The primary goal is to predict which areas of the organization will experience labor shortages or surpluses

Statistical methods capture historic trends in a company's demand for labor. Under the right conditions, these methods predict demand and supply more precisely than a human forecaster can using subjective judgment. But many important events in the labor market have no precedent. When such events occur, statistical methods are of little use. To prepare for these situations, the organization must rely on the subjective judgments of experts. Pooling their "best guesses" is an important source of ideas about the future.

Trend Analysis- Constructing and applying statistical models that predict labor demand for the next year, given relatively objective statistics from the previous year. Leading Indicators- Objective measures that accurately predict future labor demand.

At the most sophisticated level, an organization might use trend analysis which are constructing and applying statistical models that predict labor demand for the next year, given relatively objective statistics from the previous year. These statistics are called leading indicators — which are objective measures that accurately predict future labor demand. They might include measures of the economy (such as sales or inventory levels), actions of competitors, changes in technology, and trends in the composition of the workforce and overall population For example , an industrywide change in prices may signal a problem related to capacity, which in turn may signal a need for more or less labor to correct the capacity problem. Thus, when prices for many manufactured goods fell more than 5 percent in early 2007, it was an indicator that sellers' inventories were getting too large, predicting some of the many job cuts that came in 2008 as orders and production levels fell. On a more detailed scale, Walmart uses past shopping patterns to predict how many employees will be needed to staff shifts in each of its stores on any given day and time. Statistical planning models are useful when there is a long, stable history that can be used to reliably detect relationships among variables. However, these models almost always have to be complemented with subjective judgments of experts. There are simply too many "once-in-a-lifetime" changes to consider, and statistical models cannot capture them.

Transitional Matrix A chart that lists job categories held in one period and shows the proportion of employees in each of those job categories in a future period.

the analysis of a transitional matrix. This is a chart that lists job categories held in one period and shows the proportion of employees in each of those job categories in a future period. It answers two questions: "Where did people who were in each job category go?" and "Where did people now in each job category come from?" Table 5.1 is an example of a transitional matrix.

Based on the forecasts for labor demand and supply, the planner can compare the figures to determine whether there will be a shortage or surplus of labor for each job category. Determining expected shortages and surpluses allows the organization to plan how to address these challenges. Issues related to a labor surplus or shortage can pose serious challenges for the organization. Manufacturers, for example, expect to have difficulty filling skilled-trades positions such as jobs for ironworkers, machinists, plumbers, and welders. Demand for these jobs is strong and is likely to continue as important infrastructure such as bridges and tunnels ages. Also, the average age of tradespeople is rising above 55, and young people tend not to be attracted to these jobs, assuming, often incorrectly, that manufacturing-related jobs will be difficult to find or will not pay well

Goal Setting and Strategic Planning The second step in human resource planning is goal setting and strategic planning, as shown in the middle of Figure 5.1 . The purpose of setting specific numerical goals is to focus attention on the problem and provide a basis for measuring the organization's success in addressing labor shortages and surpluses. The goals should come directly from the analysis of labor supply and demand. They should include a specific figure indicating what should happen with the job category or skill area and a specific timetable for when the results should be achieved. For each goal, the organization must choose one or more human resource strategies. A variety of strategies is available for handling expected shortages and surpluses of labor. The top of Table 5.2 shows major options for reducing an expected labor surplus, and the bottom of the table lists options for avoiding an expected labor shortage. This planning stage is critical. The options differ widely in their expense, speed, and effectiveness. Options for reducing a labor surplus cause differing amounts of human suffering. The options for avoiding a labor shortage differ in terms of how easily the organization can undo the change if it no longer faces a labor shortage. For example, an organization probably would not want to handle every expected labor shortage by hiring new employees. The process is relatively slow and involves expenses to find and train new employees. Also, if the shortage becomes a surplus, the organization will have to consider laying off some of the employees. Layoffs involve another set of expenses, such as severance pay, and they are costly in terms of human suffering.

Core Competency A set of knowledge and skills that make the organization superior to competitors and create value for customers. etency

At a store, for example, core competencies include choosing merchandise that shoppers want and providing shoppers with excellent service. For other work that is not a core competency—say, cleaning the store and providing security—the organization may benefit from using HR strategies other than hiring full-time employees. Organizations try to anticipate labor surpluses far enough ahead that they can freeze hiring and let natural attrition (people leaving on their own) reduce the labor force. Unfortunately for many workers, organizations often stay competitive in a fast-changing environment by responding to a labor surplus with downsizing, which delivers fast results. The impact is painful for those who lose jobs, as well as those left behind to carry on without them . To handle a labor shortage, organizations typically hire temporary employees or use outsourcing. Because downsizing, using temporary employees, and outsourcing are most common,

Downsizing The planned elimination of large numbers of personnel with the goal of enhancing the organization's competitiveness.

1. Reducing costs —Labor is a large part of a company's total costs, so downsizing is an attractive place to start cutting costs. 2. Replacing labor with technology —Closing outdated factories, automating, or introducing other technological changes reduces the need for labor. Often, the labor savings outweigh the cost of the new technology. 3. Mergers and acquisitions —When organizations combine, they often need less bureaucratic overhead, so they lay off managers and some professional staff members. 4. Moving to more economical locations —Some organizations move from one area of the United States to another, especially from the Northeast and Midwest to the South and the mountain regions of the West. Although the recent recession hit California, Florida, and Texas particularly hard in terms of the number of job losses, the longer-term pattern of job movement to the South and West is expected to continue in the future. McDonald's recently experimented with staffing drive-up service in Michigan by installing a long-distance connection to lower-wage workers in North Dakota, who took down orders and relayed them electronically to the Michigan kitchens. Other moves have shifted jobs to other countries, including Mexico, India, and China, where wages are lower

Although downsizing has an immediate effect on costs, much of the evidence suggests that it hurts long-term organizational effectiveness. This is especially true for certain kinds of companies, such as those that emphasize research and development and where employees have extensive contact with customers. The negative effect of downsizing was especially high among firms that engaged in high-involvement work practices, such as the use of teams and performance-related pay incentives. As a result, the more a company tries to compete through its human resources, the more layoffs hurt productivity.

There seem to be several reasons. First, although the initial cost savings give a temporary boost to profits, the long-term effects of an improperly managed downsizing effort can be negative. Downsizing leads to a loss of talent, and it often disrupts the social networks through which people are creative and flexible. Unless the downsizing is managed well, employees feel confused, demoralized, and even less willing to stay with the organization. Organizations may not take (or even know) the steps that can counter these reactions—for example, demonstrating how they are treating employees fairly, building confidence in the company's plans for a stronger future, and showing the organization's commitment to behaving responsibly with regard to all its stakeholders, including employees, customers, and the community. Also, many companies wind up rehiring. Downsizing campaigns often eliminate people who turn out to be irreplaceable. example In one survey, 80 percent of the firms that had downsized later replaced some of the very people they had laid off. In one Fortune 100 firm, a bookkeeper making $9 an hour was let go. Later, the company realized she knew many things about the company that no one else knew, so she was hired back as a consultant—for $42 an hour. 12 However, recent trends in employment suggest that companies will not rehire employees for many of the jobs eliminated when they restructured, introduced automation, or moved work to lower-cost regions.

Motivation drops because any hope of future promotions—or any future—with the company dies. Many employees start looking for other employment opportunities. The negative publicity associated with a downsizing campaign can also hurt the company's image in the labor market, so it is harder to recruit employees later. Many problems with downsizing can be reduced with better planning. Instead of slashing jobs across the board, successful downsizing makes surgical strategic cuts that improve the company's competitive position, and management addresses the problem of employees becoming demoralized. example Boeing learned this lesson the hard way in the 1990s, when it reduced its workforce by letting workers choose whether they wanted to accept a buyout package in exchange for leaving. Workers with the most experience (and best prospects elsewhere) were most likely to leave, so when Boeing's orders increased and it needed to rehire later, it was competing in the labor market for the best people. To avoid that situation when it needed to cut 10,000 jobs in 2009, Boeing avoided voluntary reductions and instead required managers to pick which employees' positions would be eliminate

Reducing Hours Given the limitations of downsizing, many organizations are more carefully considering other avenues for eliminating a labor surplus (shown in Table 5.2 ). One alternative seen as a way to spread the burden more fairly is cutting work hours, generally with a corresponding reduction in pay. Besides the thought that this is a more equitable way to weather a slump in demand, companies choose a reduction in work hours because it is less costly than layoffs requiring severance pay, and it is easier to restore the work hours than to hire new employees after a downsizing effort. example Window maker Pella, for example, put its employees on a four-day workweek, and Dell Computer offered its employees a chance to take extra (unpaid) days off at the end of the year.

Early-Retirement Programs Another popular way to reduce a labor surplus is with an early-retirement program. the average age of the U.S. workforce is increasing. But even though many baby boomers are approaching traditional retirement age, early indications are that this group has no intention of retiring soon. Reasons include improved health of older people, jobs becoming less physically demanding, concerns about the long-term viability of Social Security and pensions, the recent drop in the value of older workers' retirement assets (especially stock funds and home values), and laws against age discrimination. Under the pressures associated with an aging labor force, many employers try to encourage older workers to leave voluntarily by offering a variety of early-retirement incentives. The more lucrative of these programs succeed by some measures. Research suggests that these programs encourage lower-performing older workers to retire. Sometimes they work so well that too many workers retire. Many organizations are moving from early-retirement programs to phasedretirement programs. In a phased-retirement program, the organization can continue to enjoy the experience of older workers while reducing the number of hours that these employees work, as well as the cost of those employees. This option also can give older employees the psychological benefit of easing into retirement, rather than being thrust entirely into a new way of life

While downsizing has been a popular way to reduce a labor surplus, the most widespread methods for eliminating a labor shortage are hiring temporary and contract workers and outsourcing work. Employers may arrange to hire a temporary worker through an agency that specializes in linking employers with people who have the necessary skills. The employer pays the agency, which in turn pays the temporary worker. Employers also may contract directly with individuals, often professionals, to provide a particular service. To use this source of labor effectively, employers need to overcome some disadvantages. In particular, temporary and contract workers may not be as committed to the organization, so if they work directly with customers, that attitude may spill over and affect customer loyalty. Therefore, many organizations try to use permanent employees in key jobs and use temporary and contract workers in ways that clearly supplement—and do not potentially replace—the permanent employees

Temporary employment is popular with employers because it gives them flexibility they need to operate efficiently when demand for their products changes rapidly. In addition to flexibility, temporary employment offers lower costs. Using temporary workers frees the employer from many administrative tasks and financial burdens associated with being the "employer of record." The cost of employee benefits, including health care, pension, life insurance, workers' compensation, and unemployment insurance, can account for 40 percent of payroll expenses for permanent employees. Assuming the agency pays for these benefits, a company using temporary workers may save money even if it pays the agency a higher rate for that worker than the usual wage paid to a permanent employee. Agencies that provide temporary employees also may handle some of the tasks associated with hiring. Small companies that cannot afford their own testing programs often get employees who have been tested by a temporary agency. Many temporary agencies also train employees before sending them to employers. This reduces employers' training costs and eases the transition for the temporary worker and employer. Finally, temporary workers may offer value not available from permanent employees. Because the temporary worker has little experience at the employer's organization, this person brings an objective point of view to the organization's problems and procedures. Also, a temporary worker may have a great deal of experience in other organizations that can be applied to the current assignment. To obtain these benefits, organizations need to overcome the disadvantages associated with temporary workers. For example, tension can develop between temporary and permanent employees

Employee or Contractor? Besides using a temporary-employment agency, a company can obtain workers for limited assignments by entering into contracts with them. If the person providing the services is an independent contractor, rather than an employee, the company does not pay employee benefits, such as health insurance and vacations. As with using temporary employees, the savings can be significant, even if the contractor works at a higher rate of pay. Consultants at PricewaterhouseCoopers suggest that information technology will make it so practical for contractors and employers to find each other that some contractors will form networks of talented, specialized workers. Instead of competing for full-time talent, companies will simply use contractors from these networks as needed. Companies could even contract for management talent to handle particular projects or solve short-term problems. Charles Grantham of a research group called Work Design Collaborative sees evidence that the main force slowing this trend has been the difficulty of getting and affording health insurance outside of traditional employment. If that barrier is removed, more employees might prefer independent-contractor status. 20 This strategy carries risks, however. If the person providing the service is a contractor and not an employee, the company is not supposed to directly supervise the worker. The company can tell the contractor what criteria the finished assignment should meet but not, for example, where or what hours to work. This distinction is significant, because under federal law, if the company treats the contractor as an employee, the company has certain legal obligations, described in Part 4, related to matters such as overtime pay and withholding taxes. When an organization wants to consider using independent contractors as a way to expand its labor force temporarily, human resource professionals can help by alerting the company to the need to verify that the arrangement will meet the legal requirements. A good place to start is with the advice to small businesses at the Internal

Outsourcing Contracting with another organization to perform a broad set of services.

Organizations use outsourcing as a way to operate more efficiently and save money. They choose outsourcing firms that promise to deliver the same or better quality at a lower cost. One reason they can do this is that the outside company specializes in the service and can benefit from economies of scale (the economic principle that producing something in large volume tends to cost less for each additional unit than producing in small volume). This efficiency is often the attraction for outsourcing human resource functions such as payroll. Costs also are lower when the outsourcing firm is located in a part of the world where wages are relatively low. The labor forces of countries such as China, India, Jamaica, and those in Eastern Europe have been creating an abundant supply of labor for unskilled and low-skilled work. The first uses of outsourcing emphasized manufacturing and routine tasks. However, technological advances in computer networks and transmission have speeded up the outsourcing process and have helped it spread beyond manufacturing areas and lowskilled jobs. For example, DuPont moved legal services associated with its $100 million asbestos case litigation to a team of lawyers working in the Philippines. The work is a combination of routine document handling and legal judgments such as determining the relevance of a document to the case. Salaries for lawyers and paralegals in the Philippines are about one-fifth the cost of their counterparts in the United States. 21 Outsourcing may be a necessary way to operate as efficiently as competitors, but it does pose challenges. Quality-control problems, security violations, and poor customer service have sometimes wiped out the cost savings attributed to lower wages. To ensure success with an outsourcing strategy, companies should follow these guidelines: • Learn about what the provider can do for the company, not just the costs. Make sure the company has the necessary skills, including an environment that can meet standards for clear communication, on-time shipping, contract enforcement, fair labor practices, and environmental protection. Some companies are keeping outsourcing work near or inside the United States in order to meet this full set of requirements. 22 • Do not offshore any work that is proprietary or requires tight security. 23 • Start small and monitor the work closely, especially in the beginning, when problems are most likely. 24 • Look for opportunities to outsource work in areas that promote growth, for example, by partnering with experts who can help the organization tap new markets.

Organizations facing a labor shortage may be reluctant to hire employees, even temporary workers, or to commit to an outsourcing arrangement. Especially if the organization expects the shortage to be temporary, it may prefer an arrangement that is simpler and less costly. Under some conditions, these organizations may try to garner more hours from the existing labor force, asking them to go from part-time to fulltime status or to work overtime. A major downside of overtime is that the employer must pay nonmanagement employees one-and-a-half times their normal wages for work done overtime. Even so, employers see overtime pay as preferable to the costs of hiring and training new employees. The preference is especially strong if the organization doubts that the current higher level of demand for its products will last long. For a short time at least, many workers appreciate the added compensation for working overtime. Over extended periods, however, employees feel stress and frustration from working long hours. Overtime therefore is best suited for short-term labor shortages

For whatever HR strategies are selected, the final stage of human resource planning involves implementing the strategies and evaluating the outcomes. This stage is represented by the bottom part of Figure 5.1 . When implementing the HR strategy, The organization must hold some individual accountable for achieving the goals. That person also must have the authority and resources needed to accomplish those goals. It is also important that this person issue regular progress reports, so the organization can be sure that all activities occur on schedule and that the early results are as expected. Implementation that ties planning and recruiting to the organization's strategy and to its efforts to develop employees becomes a complete program of talent management. As described in the "eHRM" box, today's computer systems have made talent management more practical. In evaluating the results, the most obvious step is checking whether the organization has succeeded in avoiding labor shortages or surpluses. Along with measuring these numbers, the evaluation should identify which parts of the planning process contributed to success or failure. For example, consider a company where meeting human resource needs requires that employees continually learn new skills. If there is a gap between needed skills and current skill levels, the evaluation should consider whether the problem lies with failure to forecast the needed skills or with implementation. Are employees signing up for training, and is the right kind of training available?

Workforce Utilization Review A comparison of the proportion of employees in protected groups with the proportion that each group represents in the relevant labor market.

Applying HR Planning to Affirmative Action As we discussed in Chapter 3, many organizations have a human resource strategy that includes affirmative action to manage diversity or meet government requirements. Meeting affirmative-action goals requires that employers carry out an additional level of human resource planning aimed at those goals. In other words, besides looking at its overall workforce and needs, the organization looks at the representation of subgroups in its labor force— for example, the proportion of women and minorities. Affirmative-action plans forecast and monitor the proportion of employees who are members of various protected groups (typically, women and racial or ethnic minorities). The planning looks at the representation of these employees in the organization's job categories and career tracks. The planner can compare the proportion of employees who are in each group with the proportion each group represents in the labor market. For example, the organization might note that in a labor market that is 25 percent Hispanic, 60 percent of its customer service personnel are Hispanic. This type of comparison is called a workforce utilization review. The organization can use this process to determine whether there is any subgroup whose proportion in the relevant labor market differs substantially from the proportion in the job category.

If the workforce utilization review indicates that some group—for example, African Americans—makes up 35 percent of the relevant labor market for a job category but that this same group constitutes only 5 percent of the employees actually in the job category at the organization, this is evidence of underutilization. That situation could result from problems in selection or from problems in internal movement (promotions or other movement along a career path). One way to diagnose the situation would be to use transitional matrices, such as the matrix shown in Table 5.1 earlier in this chapter. The steps in a workforce utilization review are identical to the steps in the HR planning process that were shown in Figure 5.1. The organization must assess current utilization patterns, then forecast how they are likely to change in the near future. If these analyses suggest the organization is underutilizing certain groups and if forecasts suggest this pattern is likely to continue, the organization may need to set goals and timetables for changing. The planning process may identify new strategies for recruitment or selection. The organization carries out these HR strategies and evaluates their success.

Recruiting is Any activity carried on by the organization with the primary purpose of identifying and attracting potential employees.

Recruiting Human Resources The role of human resource recruitment is to build a supply of potential new hires that the organization can draw on if the need arises. In human resource management, recruiting consists of any practice or activity carried on by the organization with the primary purpose of identifying and attracting potential employees. It thus creates a buffer between planning and the actual selection of new employees. The goals of recruiting (encouraging qualified people to apply for jobs) and selection (deciding which candidates would be the best fit) are different enough that they are most effective when performed separately, rather than combined as in a job interview that also involves selling candidates on the company. Because of differences in companies' strategies, they may assign different degrees of importance to recruiting. In general, however, all companies have to make decisions in three areas of recruiting: personnel policies, recruitment sources, and the characteristics and behavior of the recruiter. As shown in Figure 5.2 , these aspects of recruiting have different effects on whom the organization ultimately hires. Personnel policies influence the characteristics of the positions to be filled. Recruitment sources influence the kinds of job applicants an organization reaches. And the nature and behavior of the recruiter affect the characteristics of both the vacancies and the applicants. Ultimately, an applicant's decision to accept a job offer—and the organization's decision to make the offer—depend on the match between vacancy characteristics and applicant characteristics. The remainder of this chapter explores these three aspects of recruiting: personnel policies, recruitment sources, and recruiter traits and behaviors.

Employment at Will Employment principle that if there is no specific employment contract saying otherwise, the employer or employee may end an employment relationship at any time, regardless of cause.

Due-Process Policies Policies that formally lay out the steps an employee may take to appeal the employer's decision to terminate that employee.

• Internal versus external recruiting —Organizations with policies to "promote from within" try to fill upper-level vacancies by recruiting candidates internally—that is, finding candidates who already work for the organization. Opportunities for advancement make a job more attractive to applicants and employees, as illustrated by the example in the "Best Practices" box. Decisions about internal versus external recruiting affect the nature of jobs, recruitment sources, and the nature of applicants, as we will describe later in the chapter. Lead-the-market pay strategies —Pay is an important job characteristic for almost all applicants. Organizations have a recruiting advantage if their policy is to take a "lead-the-market" approach to pay—that is, pay more than the current market wages for a job. Higher pay can also make up for a job's less desirable features, such as working on a night shift or in dangerous conditions. Organizations that compete for applicants based on pay may use bonuses, stock options, and other forms of pay besides wages and salaries. Chapters 11 and 12 will take a closer look at these and other decisions about pay. • Employment-at-will policies —Within the laws of the state where they are operating, employers have latitude to set polices about their rights in an employment relationship. A widespread policy follows the principle of employment at will, which holds that if there is no specific employment contract saying otherwise, the employer or employee may end an employment relationship at any time. An alternative is to establish extensive due-process policies, which formally lay out the steps an employee may take to appeal an employer's decision to terminate that employee. An organization's lawyers may advise the company to ensure that all recruitment documents say the employment is "at will," to protect the company from lawsuits about wrongful discharge. Management must decide how to weigh any legal advantages against the impact on recruitment. Job applicants are more attracted to organizations with due-process policies, which imply greater job security and concern for protecting employees, than to organizations with employment-at-will policies. 30 • Image advertising —Besides advertising specific job openings, as discussed in the next section, organizations may advertise themselves as a good place to work in general. Advertising designed to create a generally favorable impression of the organization is called image advertising. Image advertising is particularly important for organizations in highly competitive labor markets that perceive themselves as having a bad image. 31 Research suggests that the image of an organization's brand—for example, innovative, dynamic, or fun— influences the degree to which a person feels attracted to the organization. This attraction is especially true if the person's own traits seem to match those of the organization. Also, job applicants seem to be particularly sensitive to issues of diversity and inclusion in image advertising, so organizations should ensure that their image advertisements reflect the broad nature of the labor market from which they intend to recruit.

Due-Process Policies Policies that formally lay out the steps an employee may take to appeal the employer's decision to terminate that employee.

Job Posting The process of communicating information about a job vacancy on company bulletin boards, in employee publications, on corporate intranets, and anywhere else the organization communicates with employees.

message

job posting, or communicating information about the vacancy on On company bulletin boards In employee publications On corporate intranets Anywhere else organization communicates with employees Managers also may identify candidates to recommend for vacancies. Policies that emphasize promotions and even lateral moves to achieve broader career experience can give applicants a favorable impression of the organization's jobs. The use of internal sources also affects what kinds of people the organization recruits.

For the employer, relying on internal sources offers several advantages 1. It generates applicants who are well known to the organization. 2. These applicants are relatively knowledgeable about the organization's vacancies, which minimizes the possibility of unrealistic job expectations. 3. Filling vacancies through internal recruiting is generally cheaper and faster than looking outside the organization. example The value of a strong internal hiring system can be seen in the leadership of North Jersey Federal Credit Union. The credit union's chief executive, Lourdes Cortez, has been with the credit union for more than 20 years, starting out as a teller. From that entry-level position, Cortez worked her way into management. Along the way, she held jobs in almost every department (skipping only accounting) and got to know the organization's members (credit union customers) firsthand. Explaining her strengths, Cortez says, "Having worked my way up at the credit union absolutely gives me a number of different perspectives. I've worked in every department, so I have respect for employees in those positions, and I relate better to membership because I've dealt with them on a one-on-one basis." 36

External Sources Despite the advantages of internal recruitment, organizations often have good reasons to recruit externally. For entry-level positions and perhaps for specialized upper-level positions, the organization has no internal recruits from which to draw. Also, bringing in outsiders may expose the organization to new ideas or new ways of doing business. An organization that uses only internal recruitment can wind up with a workforce whose members all think alike and therefore may be poorly suited to innovation. And finally, companies that are able to grow during a slow economy can gain a competitive edge by hiring the best talent when other organizations are forced to avoid hiring, freeze pay increases, or even lay off talented people. So organizations often recruit through direct applicants and referrals, advertisements, employment agencies, schools, and Web sites. Figure 5.3 shows which of these sources are used most among large companies surveyed.

Direct Applicants People who apply for a vacancy without prompting from the organization. Referrals People who apply for a vacancy because someone in the organization prompted them to do so.

Direct applicants are people who apply for a vacancy without prompting from the organization. Referrals are people who apply because someone in the organization prompted them to do so. According to the survey results shown in Figure 5.3 , the largest share (over onefourth) of new employees hired by large companies came from referrals, and the next largest share (over 22 percent) came from direct applications made at the employer's Web site. These two sources of recruits share some characteristics that make them excellent pools from which to draw.

These two sources of recruits share some characteristics that make them excellent pools from which to draw. One advantage is that many direct applicants are to some extent already "sold" on the organization. Most have done some research and concluded there is enough fit between themselves and the vacant position to warrant submitting an application, a process called self-selection, which, when it works, eases the pressure on the organization's recruiting and selection systems. A form of aided self-selection occurs with referrals. Many job seekers look to friends, relatives, and acquaintances to help find employment. Using these social networks not only helps the job seeker but also simplifies recruitment for employers. Current employees (who are familiar with the vacancy as well as the person they are referring) decide that there is a fit between the person and the vacancy, so they convince the person to apply for the job. An additional benefit of using such sources is that it costs much less than formal recruiting efforts. Considering these combined benefits, referrals and direct applications are among the best sources of new hires. Some employers offer current employees financial incentives for referring applicants who are hired and perform acceptably on the job (for example, if they stay 180 days). Other companies such as Google and SAS play off their good reputations in the labor market to generate direct applications. SAS, a Cary, North Carolina-based developer of business systems, is so well known in the software industry for its generous workplace benefits and challenging assignments that recruiting is a bargain—partly because so many people go to the company looking for jobs and partly because they tend to stick around when they are hired.

Nepotism The practice of hiring relatives The major downside of referrals is that they limit the likelihood of exposing the organization to fresh viewpoints. People tend to refer others who are like themselves. Furthermore, sometimes referrals contribute to hiring practices that are or that appear unfair, an example being nepotism, or the hiring of relatives. Employees may resent the hiring and rapid promotion of "the boss's son" or "the boss's daughter," or even the boss's friend

What do we need to say? To whom do we need to say it? With respect to the first question, an ad should give readers enough information to evaluate the job and its requirements, so they can make a well-informed judgment about their qualifications. Providing enough information may require long advertisements, which cost more. The employer should evaluate the additional costs against the costs of providing too little information: Vague ads generate a huge number of applicants, including many who are not reasonably qualified or would not accept the job if they learned more about it. Reviewing all these applications to eliminate unsuitable applicants is expensive. In practice, the people who write job advertisements tend to overstate the skills and experience required, perhaps generating too few qualified candidates For example, some have blamed the shortage of qualified engineers in America on job advertising that requires experience with particular processes or software programs, rather than looking for broader abilities that can be transferred to new applications. Specifying whom to reach with the message helps the advertiser decide where to place the ad. Ads placed in the classified section of local newspapers are relatively inexpensive yet reach many people in a specific geographic area who are currently looking for work (or at least interested enough to be reading the classifieds). On the downside, this medium offers little ability to target skill levels. Typically, many of the people reading classified ads are either over- or underqualified for the position. Also, people who are not looking for work rarely read the classifieds. These people may include candidates the organization could lure from their current employers. For reaching a specific part of the labor market, including certain skill levels and more people who are employed, the organization may get better results from advertising in professional or industry journals. Some employers also advertise on television— particularly cable television

Electronic Recruiting In recent years, employers have shifted using their spending on job advertisements away from print ads to online job advertising or a combination of the two. A recent survey by the Conference Board found that the number of online job ads rose by 24 percent over the previous year. Online recruiting generally involves posting career information at company Web sites to address people who are interested in the particular company and posting paid advertisements at career services to attract people who are searching for jobs. Company's are also visiting network sites such as Linked In and Facebook to find job candidates. Most large companies and many smaller ones make career information available at their Web sites. To make that information easier to find, they may register a domain name with a ".jobs" extension, such as www.starbucks.jobs for a link to information about careers at Starbucks and www.unionpacific.jobs for information about careers at Union Pacific. To be an effective recruiting tool, corporate career information should move beyond generalities, offering descriptions of open positions and an easy way to submit a résumé. One of the best features of this kind of electronic recruiting is the ability to target and attract job candidates whose values match the organization's values and whose skills match the job requirements Candidates also appreciate an e-mail response that the company has received the résumé—especially a response that gives a timetable about further communications from the company. Accepting applications at the company Web site is not so successful for smaller and less well-known organizations, because fewer people are likely to visit the Web site. These organizations may get better results by going to the Web sites that are set up to attract job seekers, such as Monster, Yahoo HotJobs, and CareerBuilder, which attract a vast array of applicants. At these sites, job seekers submit standardized résumés. Employers can search the site's database for résumés that include specified key terms, and they can also submit information about their job opportunities, so that job seekers can search that information by key term. With both employers and job seekers submitting information to and conducting searches on them, these sites offer an efficient way to find matches between job seekers and job vacancies. However, a drawback is that the big job Web sites can provide too many leads of inferior quality because they are so huge and serve all job seekers and employers, not a select segment. Because of this limitation of the large Web sites, smaller, more tailored Web sites called "niche boards" focus on certain industries, occupations, or geographic areas. Telecommcareers.net , for example, is a site devoted to, as the name implies, the telecommunications industry. CIO.com , a companion site to CIO Magazine, specializes in openings for chief information officers. In addition, companies can improve the effectiveness of online advertising by employing more interactive tools, such as social networking.

Public Employment Agencies The Social Security Act of 1935 requires that everyone receiving unemployment compensation be registered with a local state employment office. These state employment offices work with the U.S. Employment Service (USES) to try to ensure that unemployed individuals eventually get off state aid and back on employer payrolls. To accomplish this, agencies collect information from the unemployed people about their skills and experience. Employers can register their job vacancies with their local state employment office, and the agency will try to find someone suitable, using its computerized inventory of local unemployed individuals. The agency refers candidates to the employer at no charge. The organization can interview or test them to see if they are suitable for its vacancies. Besides offering access to job candidates at low cost, public employment agencies can be a useful resource for meeting certain diversity objectives. Laws often mandate that the agencies maintain specialized "desks" for minorities, disabled individuals, and war veterans. Employers that feel they currently are underutilizing any of these subgroups of the labor force may find the agencies to be an excellent source. The government also provides funding to a variety of local employment agencies. For example, in Virginia, the Frederick County Job Training Agency receives funding from the federal, state, and county governments to help unemployed workers find and prepare for new jobs. When the Von Hoffmann Corporation closed its Frederick plant to consolidate operations in Missouri and Iowa, the 165 employees didn't want to move. A career consultant at the Job Training Agency met with each of them to record their work history and goals. The laid-off workers also can use the agency to visit online job sites, mail résumés at no charge, and participate in classes on writing résumés and interviewing for a job. The Job Training Agency shares a building with the county's Office of Economic Development, in the hope that the development agency, which encourages businesses to locate in the county, can work with it to match employers and workers.

In contrast to public employment agencies, which primarily serve the blue-collar labor market, private employment agencies provide much the same service for the whitecollar labor market. Workers interested in finding a job can sign up with a private employment agency whether or not they are currently unemployed. Another difference between the two types of agencies is that private agencies charge the employers for providing referrals. Therefore, using a private employment agency is more expensive than using a public agency, but the private agency is a more suitable source for certain kinds of applicants. For managers or professionals, an employer may use the services of a type of private agency called an executive search firm (ESF). People often call these agencies "headhunters" because, unlike other employment agencies, they find new jobs for people almost exclusively already employed. For job candidates, dealing with executive search firms can be sensitive. Typically, executives do not want to advertise their availability, because it could trigger a negative reaction from their current employer. ESFs serve as a buffer, providing confidentiality between the employer and the recruit. That benefit may give an employer access to candidates it cannot recruit in other, more direct ways.

Colleges and Universities Most colleges and universities have placement services that seek to help their graduates obtain employment. On-campus interviewing is the most important source of recruits for entrylevel professional and managerial vacancies. Organizations tend to focus especially on colleges that have strong reputations in areas for which they have critical needs—say, chemical engineering or public accounting. The recruiting strategy at 3M includes concentrating on 25 to 30 selected universities. The company has a commitment to those selected universities and returns to them each year with new job openings. HR professionals make sure that the same person works with the same university year in and year out, to achieve "continuity of contact. One of the best ways for a company to establish a stronger presence on a campus is with a college internship program. Embassy Suites is one company that participates in such a program. How does this benefit the company and the students at the same time? Many employers have found that successfully competing for the best students requires more than just signing up prospective graduates for interview slots. One of the best ways to establish a stronger presence on a campus is with a college internship program. Internship programs give an organization early access to potential applicants and let the organization assess their capabilities directly. IBM uses a program called Latin American Grid, in which it partners with colleges in Florida, Mexico, Puerto Rico, and Barcelona by donating hardware and software and collaborating on research. What IBM gets in return is access to a pool of talented Latin American scholars, which it cultivates through mentoring and an internship program. Ultimately, it hires many of them as permanent employees. 51 Another way of increasing the employer's presence on campus is to participate in university job fairs. In general, a job fair is an event where many employers gather for a short time to meet large numbers of potential job applicants. Although job fairs can be held anywhere (such as at a hotel or convention center), campuses are ideal locations because of the many well-educated, yet unemployed, individuals who are there. Job fairs are an inexpensive means of generating an on-campus presence. They can even provide one-on-one dialogue with potential recruits—dialogue that would be impossible through less interactive media, such as newspaper ads.

Yield Ratio A ratio that expresses the percentage of applicants who successfully move from one stage of the recruitment and selection process to the next. By comparing yield ratios of different recruitment sources, we can determine which source is best or most efficient for type of vacancy.

Find cost of using a particular recruitment source for a particular type of vacancy. Divide that cost by number of people hired to fill that type of vacancy. A low cost per hire means the recruitment source is efficient.

In general, there are few rules that say what recruitment source is best for a given job vacancy. Therefore, it is wise for employers to monitor the quality of all their recruitment sources. One way to do this is to develop and compare yield ratios for each source. A yield ratio expresses the percentage of applicants who successfully move from one stage of the recruitment and selection process to the next . For example, the organization could find the number of candidates interviewed as a percentage of the total number of résumés generated by a given source (that is, number of interviews divided by number of résumés). A high yield ratio (large percentage) means that the source is an effective way to find candidates to interview. By comparing the yield ratios of different recruitment sources, HR professionals can determine which source is the best or most efficient for the type of vacancy.

To compute this amount, find the cost of using a particular recruitment source for a particular type of vacancy. Then divide that cost by the number of people hired to fill that type of vacancy. A low cost per hire means that the recruitment source is efficient; it delivers qualified candidates at minimal cost. To see how HR professionals use these measures, look at the examples in Table 5.3 . This table shows the results for a hypothetical organization that used five kinds of recruitment sources to fill a number of vacancies. For each recruitment source, the table shows four yield ratios and the cost per hire. To fill these jobs, the best two sources of recruits were local universities and employee referral programs. Newspaper ads generated the largest number of recruits (500 résumés). However, only 50 were judged acceptable, of which only half accepted employment offers, for a cumulative yield ratio of 25/500, or 5 percent. Recruiting at renowned universities generated highly qualified applicants, but relatively few of them ultimately accepted positions with the organization. Executive search firms produced the highest cumulative yield ratio. These generated only 20 applicants, but all of them accepted interview offers, most were judged acceptable, and 79 percent of these acceptable candidates took jobs with the organization. However, notice the cost per hire. The executive search firms charged $90,000 for finding these 15 employees, resulting in the largest cost per hire. In contrast, local universities provided modest yield ratios at the lowest cost per hire. Employee referrals provided excellent yield ratios at a slightly higher cost.

Recruiter Traits and Behaviors As we showed in Figure 5.2 , the third influence on recruitment outcomes is the recruiter, including this person's characteristics and the way he or she behaves. The recruiter affects the nature of both the job vacancy and the applicants generated. However, the recruiter often becomes involved late in the recruitment process. In many cases, by the time a recruiter meets some applicants, they have already made up their minds about what they desire in a job, what the vacant job has to offer, and their likelihood of receiving a job offer. Many applicants approach the recruiter with some skepticism. Knowing it is the recruiter's job to sell them on a vacancy, some applicants discount what the recruiter says, in light of what they have heard from other sources, such as friends, magazine articles, and professors. When candidates are already familiar with the company through knowing about its products, the recruiter's impact is especially weak. For these and other reasons, recruiters' characteristics and behaviors seem to have limited impact on applicants' job choices.

Characteristics of the Recruiter Most organizations must choose whether their recruiters are specialists in human resources or are experts at particular jobs (that is, those who currently hold the same kinds of jobs or supervise people who hold the jobs). According to some studies, applicants perceive HR specialists as less credible and are less attracted to jobs when recruiters are HR specialists. The evidence does not completely discount a positive role for personnel specialists in recruiting. It does indicate, however, that these specialists need to take extra steps to ensure that applicants perceive them as knowledgeable and credible. In general, applicants respond positively to recruiters whom they perceive as warm and informative. "Warm" means the recruiter seems to care about the applicant and to be enthusiastic about the applicant's potential to contribute to the organization. "Informative" means the recruiter provides the kind of information the applicant is seeking. The evidence of impact of other characteristics of recruiters—including their age, sex, and race—is complex and inconsistent

Realistic Job Preview Background information about a job's positive and negative qualities

Behavior of the Recruiter Recruiters affect results not only by providing plenty of information, but by providing the right kind of information. Perhaps the most-researched aspect of recruiting is the level of realism in the recruiter's message. Because the recruiter's job is to attract candidates, recruiters may feel pressure to exaggerate the positive qualities of the vacancy and to downplay its negative qualities. Applicants are highly sensitive to negative information. The highest-quality applicants may be less willing to pursue jobs when this type of information comes out. But if the recruiter goes too far in a positive direction, the candidate can be misled and lured into taking a job that has been misrepresented. Then unmet expectations can contribute to a high turnover rate. When recruiters describe jobs unrealistically, people who take those jobs may come to believe that the employer is deceitful. Many studies have looked at how well realistic job previews —background information about jobs' positive and negative qualities—can get around this problem and help organizations minimize turnover among new employees. On the whole, the research suggests that realistic job previews have a weak and inconsistent effect on turnover. Although recruiters can go overboard in selling applicants on the desirability of a job vacancy, there is little support for the belief that informing people about the negative characteristics of a job will "inoculate" them so that the negative features don't cause them to quit. Finally, for affecting whether people choose to take a job, but even more so, whether they stick with a job, the recruiter seems less important than an organization's personnel policies that directly affect the job's features (pay, security, advancement opportunities, and so on)

Recruiters should provide timely feedback. Applicants dislike delays in feedback. They may draw negative conclusions about the organization (for starters, that the organization doesn't care about their application). Recruiters should avoid offensive behavior. They should avoid behaving in ways that might convey the wrong impression about the organization. Figure 5.4 quotes applicants who felt they had extremely bad experiences with recruiters. Their statements provide examples of behaviors to avoid. • The organization can recruit with teams rather than individual recruiters. Applicants view job experts as more credible than HR specialists, and a team can include both kinds of recruiters. HR specialists on the team provide knowledge about company policies and procedures. Through such positive behavior, recruiters can give organizations a better chance of competing for talented human resources.