HRMN 495- Risk Management Audit

Please see the attached files and make sure you understand the questions and carefully follow the rubrics.

PLEASE READ CAREFULLY

– Please use APA (7th edition) formatting

– All questions and each part of the question should be answered in detail (Go into depth)

– Response to questions must demonstrate understanding and application of concepts covered in class,

– Responses MUST be organized (Should be logical and easy to follow)

Risk Management Audit

Based on what you have learned about CSR and diversity, equity, and inclusion, use this

risk management audit checklist

to audit an organization you have access to. You may need to consult with HR in your organization for some of the responses. Provide an example or evidence for each row for which your answer is “yes” and a recommendation for your organization when your answer is “no.” Make sure to support your responses by citing credible sources.

Questions 11-13 in the audit focus on CSR. Choose which of these you find most important for your organization and explain why this issue is relevant and how it contributes to organizational effectiveness. Identify legal implications as well as risks if this issue is not addressed. Write 2–3 paragraphs on this, supporting your explanation with the citations.

Rubrics

You MUST Implement a risk management audit of HR policies, processes, and procedures that identifies key issues and makes recommendations

You MUST Explain one of the corporate social responsibility (CSR) issues in the worksheet and how it contributes to organizational effectiveness.

YOU MUST Explain the risks and legal implications associated with the corporate social responsibility (CSR) issue.

You MUST Communicates information clearly and professionally with appropriate supporting evidence, formatting, and grammar.

Human Resource Risk Management Audit for DE&I and CSR

Yes

Evidence or example

Recommendations

Example: Does your organization include DE&I practices in its mission and vision?

The mission and vision do not address DE&I.

In order to communicate the value of DE&I, organizations should discuss their DE&I practices as part of their mission and vision (Shumer, 2019).

Example: Does your organization participate in any crisis or emergency relief initiatives?

The organization sends teams to areas of flooding when this occurs. Participants get paid for their time away and receive a stipend to travel if needed.

1. Does your organization have a practice in place to increase diversity disclosure?

2. Does your organization have candidate application processes that meet accessibility standards?

3. Does your organization have candidate application processes encourage a diverse pool of applicants?

4. Does your organization have a DE&I statement that is aligned with your company’s mission and vision?

5. Does your organization include the values of DE&I in company policies and practices?

6. Does your organization explain their DE&I practices and policies to employees?

7. Does your organization have an anti-harassment and/or anti-bullying policy in place?

8. Does your organization have a process in place for complaints about discrimination?

9. Does your organization offer training on DE&I?

10. Does your performance management process include DE&I competencies?

11. Does your organization have partnerships with local community groups?

12. Does your organization have language around CSR in its mission and vision?

13. Does your organization prioritize suppliers that are focused on CSR?

Discussion of Key CSR Issue

Address the following questions in 2–3 paragraphs, supporting your explanation with the citations:

· Which of the last three questions (11–13) is most important to your organization? Why is it relevant?

· How does this issue affect organizational effectiveness?

· What risks are there for the organization if this issue is not addressed? What legal implications does it have?

Diversity, Equity, and Inclusion (DE&I)

According to SHRM, “the diversity, equity, and inclusion (DE&I) function deals with the qualities, experiences, and work styles that make individuals unique (e.g., age, race, religion, disabilities, ethnicity) as well as how organizations can leverage those qualities in support of business objectives” (SHRM, n.d.) Diversity refers to the presence of people who differ from each other in those characteristics within a group, while “inclusion describes the extent to which each person in an organization feels welcomed, respected, supported, and valued as a team member” (SHRM, n.d.). Inclusion requires employees to not only be able to work with each other but also understand and respect different perspectives and worldviews.

Finally, equity ensures that all individuals have access to the same opportunities, particularly in terms of training, advancement, or promotion. While equal employment opportunity (EEO) and affirmative action are a part of this, DE&I goes beyond compliance to focusing on the advantages and opportunities in diversity, equity, and inclusion.

References

SHRM. (2020, August 17). Introduction to the human resources discipline of diversity, equity and inclusion

Diversity and

Inclusion

Diversity

Diversity denotes the ways in which people are similar or different from

one another (University of Minnesota, 2017). There is no single definition

of diversity that is used in research or in organizations, but there are

common themes that span across research and practice that can enhance

our understanding of diversity:

• Diversity is respecting the differences among people (Mazibuko &

Govender,

2017).

• Diversity is set of actions that include appreciating individual

uniqueness and practicing mutual respect (Patrick & Kumar, 2012).

• Diversity can be divided into surface‐level traits and deep‐level

traits. Surface‐level traits refer to characteristics that are highly

visible (e.g. race, gender, age) and deep‐level traits refer to

characteristics that are harder to see from the outside (e.g. values,

attitudes, beliefs) (University of Minnesota, 2017).

Learning Resource

Diversity and Inclusion

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UMGC (n.d.). Diversity and Inclusion. Retrieved from https://leocontent.umgc.edu/content/umuc/tus/hrmn/hrmn495/2225/learning-
resource-list/diversity-and-inclusion.html#

Source: University of Minnesota, 2017

Regardless of which description of diversity resonates with you, it is most

important to understand the multitude of individual attributes that can

contribute to diversity in an organization. To ensure organizational

success in a time of rapid demographic changes in the United States and

global workforces, we must adopt a broader perspective and focus on the

many aspects of diversity (Derven, 2014). Typically, when we think about

diversity in organizations, we tend to think largely in terms of surface‐

level diversity. In reality, however, there are countless differences

between individuals that contribute to the diversity of an organization

that are not as easily recognized. In contemporary organizations, for

example, we are likely to encounter differences among people related to

sexual orientation, religion, physical abilities, education, nationality,

cultural background, and more.

Diversity Management in Organizations

Diversity in organizations comes with an array of advantages and

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challenges. It is crucial to recognize both the challenges and advantages

of diversity so that we, as members of organizations, can contribute to

diversity management. Diversity management is defined as “a process

intended to create and maintain a positive work environment where the

similarities and differences of individuals are valued, so that all can reach

their potential and maximize their contributions to an organization’s

strategic goals and objectives” (Patrick & Kumar, 2012, p.1 ). Potential

advantages of successfully managing diversity in organizations include

more creative decision‐making processes, better employee performance,

and better financial outcomes for organizations (Patrick & Kumar, 2012;

Theodorakopoulos & Budhwar, 2015; University of Minnesota, 2017).

Challenges that may occur as a result of diversity are negative effects on

an employee’s mental and physical health because of feelings of exclusion

and decreased effectiveness of work teams (Shore, Cleveland, & Sanchez,

2018; Theodorakopoulos & Budhwar, 2015).

Approaches to diversity management can be separated into two main

categories: organizational compliance with legal mandates and

organizational efforts to minimize the effects of institutionalized

discrimination. Over the years, the emphasis of diversity management in

organizations has mostly shifted from complying with applicable federal

laws to creating truly inclusive environments for all employees.

Historically, individuals who did not meet the ideal worker image (e.g.,

white, male) faced discrimination that resulted in disadvantages in terms

of career advancement. Although we have made significant progress in

the area of diversity management, images of the ideal worker are resistant

to change (Ely & Meyerson, 2000, 2010; Ramarajan & Reid, 2013). As

such, it became necessary to implement protective measures to ensure

equal treatment in the workplace. More specifically, legislation was set in

place for people that are traditionally marginalized in organizations,

including the following (University of Minnesota, 2017):

• The Equal Pay Act (1963) prohibits discrimination in pay based on

gender

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• Title VII of the Civil Rights Act (1964) prohibits discrimination in all

employment‐related decisions based on gender, race, and religion

• The Age Discrimination in Employment Act (1967) prohibits

discrimination against employees over 40 years of age

• The Americans with Disabilities Act (ADA) (1990) prohibits

discrimination in employment against individuals with physical as

well as mental disabilities, if these individuals are otherwise qualified

to do their jobs with or without reasonable accommodation.

Organizational compliance of these federally mandated policies is

typically a function of an organization’s human resources unit. In addition,

the Equal Employment Opportunity Commission (EEOC)—a federal

entity—is responsible for managing complaints from individuals who

report instances of discrimination

(University of Minnesota, 2016).

Furthermore, it is important to note that as the workforce becomes more

and more diverse, there will be additional challenges to ensuring that

individuals are protected from discrimination along all dimensions of

diversity. Though there are legal protections in place for certain classes of

employees, discrimination in the workplace is still prevalent.

Discrimination in the workplace—whether intentional or unintentional—

can be captured under the umbrella of institutionalized discrimination.

Institutionalized discrimination is defined as a system that “creates and

sustains privileges for some while creating and sustaining disadvantages

for others” (Patrick & Kumar, 2012, p. 1). For the purposes of this brief

overview, we will review three concepts that may result from

institutionalized discrimination and often emerge in organizations—power

imbalance, stereotyping, and microaggressions.

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For a more thorough review of how
institutionalized discrimination may emerge in
the workplace, read Diversity and inclusion in
different work settings: Emerging patterns,
challenges, and research agenda
(http://ezproxy.umgc.edu/login?url=http:
//search.ebscohost.com.ezproxy.umgc.edu
/login.aspx?direct=true&db=bth&
AN=78142583&site=eds‐live&scope=site) .

Individuals that belong to traditionally marginalized groups are often

underrepresented in positions of power within organizations as a form of

power imbalance. One way this occurs is the exclusion of marginalized

employees from networks that regulate access to information,

opportunities, and resources needed to advance (Elliott & Smith, 2004;

Nkomo & Hoobler, 2014). This occurrence is summed up by Acker (2006,

p. 143) as “systematic disparities between participants in power and

control over goals, resources, and outcomes; workplace decisions such as

how to organize work; opportunities for promotion and interesting work.”

Stereotyping is the act of generalizing a particular group of people.

Stereotypes are often used to make decisions about a particular individual

without actually verifying whether the assumption holds for the person in

question (University of Minnesota, 2017). Microagressions are “verbal,

behavioral, or environmental treatment that communicates a devaluation

of an individual’s contributions” (Shore, Cleveland, & Sanchez, 2018, p.

180). It is important to note that power imbalances, stereotypes, and

microaggressions are not mutually exclusive constructs or fully

representative of the challenges that may be faced by marginalized

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http://ezproxy.umgc.edu/login?url=http://search.ebscohost.com.ezproxy.umgc.edu/login.aspx?direct=true&db=bth&AN=78142583&site=eds-live&scope=site

groups within organizations.

Inclusion

Inclusion is a concept that is closely related to diversity, however some

researchers believe a key distinction to be that management of diversity

can be legally mandated, whereas inclusion is the result of purposeful

planning and action on the part of an organization (Shore, Cleveland, &

Sanchez, 2018). In general, inclusion refers to “the act of including

someone or something in a group, set, or total” (Lumen Learning, n.d.). In

addition, the literature suggests there are common elements that are

indicative of inclusive workplaces:

• a focus on open‐mindedness, appreciation for diversity, and equal

opportunity for all employees (Lumen Learning, n.d.)

• the feeling that individuals can be authentic at work (Shore,

Cleveland, & Sanchez, 2018)

Additionally, organizational culture plays a prominent role in creating an

inclusive environment for employees because the culture of an

organization sets expectations of how employees should interact with

each other. An organization cannot fully leverage diversity if the

environment is exclusionary. As such, without a culture of respect and

appreciation for diversity in an organization, any efforts to promote

inclusivity will likely falter.

Workplace Inclusion Strategies

Cultivating an inclusive workplace is best achieved through a top‐down

approach. Organizational leaders must actively promote an environment

where all employees are equally valued and receive equal opportunities.

Beyond support from senior leadership, fostering an inclusive workplace

is the responsibility of all employees. Inclusion is created for everyone by

everyone. Here are examples of how all employees can contribute to

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creating an inclusive work environment:

• When you are working as a member of a team, ensure that all team

members have an opportunity to speak up and be heard, and provide

a safe space for others to share their point of view (Sherbin & Rashid,

2017).

• Proactively seek opportunities to mentor or be a sponsor for

colleagues who belong to typically marginalized groups (Sherbin &

Rashid, 2017).

• Volunteer to be a part of your organization’s Employee Resource

Group (ERG). If an ERG does not exist, recommend that one be

established! In organizations, ERGs are established networks that are

tasked with fostering a welcoming environment for

underrepresented groups (Derven, 2014).

There are also more formal approaches that are often used to increase

workplace inclusion. These strategies are typically implemented by the

Chief of Diversity and Inclusion, human resource representatives, or other

senior leadership officials. It is imperative to be aware of these tools so

you can suggest them to management if they are not already being used

in your organization:

• Offer organization‐wide diversity training that educates on cultural

awareness and bias.

• Hold open forums where employees have an opportunity to share

their thoughts on diversity relations in the organization.

• Implement an organization‐specific diversity management plan. A

diversity management plan is an action plan that can be used to

establish and maintain a culture of inclusivity in organizations

(University of Minnesota, 2016).

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Things to Consider When Creating a Multicultural and Diverse

Work Environment

Here are some questions the University of California, Berkeley

(2018) HR department suggests considering to assess the quality of

diversity management:

• Do you test your assumptions before acting on them?

• Do you believe there is only one right way of doing things, or

that there are a number of valid ways that accomplish the same

goal? Do you convey that to staff?

• Do you have honest relationships with each staff member you

supervise? Are you comfortable with each of them? Do you

know what motivates them, what their goals are, and how they

like to be recognized?

• Are you able to give negative feedback to someone who is

culturally different from you?

• When you have open positions, do you insist on a diverse

screening committee and make additional outreach efforts to

ensure that a diverse pool of candidates has applied?

• When you hire a new employee, do you not only explain job

responsibilities and expectations clearly but orient the person to

the campus and department culture and unwritten rules?

• Do you rigorously examine your unit’s existing policies,

practices, and procedures to ensure that they do not

differentially impact different groups? When they do, do you

change them?

• Are you willing to listen to constructive feedback from your

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staff about ways to improve the work environment? Do you

implement staff suggestions and acknowledge their

contribution?

• Do you take immediate action with people you supervise when

they behave in ways that show disrespect for others in the

workplace, such as inappropriate jokes and offensive terms?

• Do you make good faith efforts to meet your affirmative action

goals?

• Do you have a good understanding of institutional isms such as

racism and sexism and how they manifest themselves in the

workplace?

• Do you ensure that assignments and opportunities for

advancement are accessible to everyone?

References

Acker, J. (2006). Inequality regimes: Gender, class, and race in

organizations. Gender & Society, 20(4), 441–464.

Derven, M. (2014). Diversity and inclusion by design: Best practices from

six global companies. Industrial and Commercial Training, 46(2),

84–91.

Elliott, J. R., & Smith, R. A. (2004). Race, gender, and workplace power.

American Sociological Review, 69, 365–386.

Ely, R. J., & Meyerson, D. E. (2000). Theories of gender in organizations: A

new approach to organizational analysis and change. Research in

Organizational Behavior, 22, 103–151.

Ely, R. J., & Meyerson, D. E. (2010). An organizational approach to

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undoing gender: The unlikely case of offshore oil platforms.

Research in Organizational Behavior, 30, 3–34.

Lumen Learning. (n.d.). Boundless Management: Diversity in

Organizations. https://courses.lumenlearning.com/boundless‐

management/chapter/diversity‐in‐organizations/

Mazibuko, J. V. & Govender, K. K. (2017). Exploring workplace diversity

and organisational effectiveness: A South African exploratory case

study. SA Journal of Human Resource Management.

doi: 10.4102/sajhrm.v15i0.865

Nkomo, S. M., & Hoobler, J. (2014). An historical perspective on diversity

ideologies in the US: Reflections on HRM research and practice.

Human Resource Management Review, 24(3), 245–257.

Patrick, H. A., & Kumar, V. R. (2012). Managing workplace diversity:

Issues and challenges. SAGE Open. doi:

10.1177/2158244012444615

Ramarajan, L., & Reid, E. (2013). Shattering the myth of separate worlds:

Negotiating nonwork identities at work. Academy of Management

Review, 38(4), 621–644.

Sherbin, L., & Rashid, R. (2017). Diversity doesn’t stick without inclusion.

Harvard Business Review. Retrieved from https://hbr.org/2017/02

/diversity‐doesnt‐stick‐without‐inclusion

Shore, L. M., Cleveland, J. N., & Sanchez, D. (2018). Inclusive workplaces:

A review and model. Human Resource Management Review, 28,

176–189.

Theodorakopoulos, N. & Budhwar, P. (2015). Diversity and inclusion in

different work settings: Emerging patterns, challenges, and

research agenda. Human Resource Management, 54(2), 177–197.

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University of California, Berkeley. (2018). How Well Do You Manage

Diversity in Your Unit? https://hr.berkeley.edu/hr‐network/central‐

guide‐managing‐hr/managing‐hr/interaction/diversity/resources

University of Minnesota. (2016, March 22). Human Resource

Management. https://open.lib.umn.edu

/humanresourcemanagement/

University of Minnesota. (2017, January 04). Organizational Behavior.

https://open.lib.umn.edu/organizationalbehavior/chapter/2‐2‐

demographic‐diversity/

Licenses and Attributions

2.2 Demographic Diversity (http://open.lib.umn.edu

/organizationalbehavior/chapter/2‐2‐demographic‐diversity/) from

Organizational Behavior by the University of Minnesota Libraries

Publishing is an adaptation of a work whose original author and publisher

request anonymity and is available under a Creative Commons

Attribution‐NonCommercial‐ShareAlike 4.0 International

University of Minnesota. UMGC has modified this work and it is available

under the original license.

All links to external sites were verified at the time of publication. UMGC is not responsible for the

validity or integrity of information located at external sites.

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2.2 Demographic Diversity

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Diversity in Human Resources

What Is Diversity?

The term diversity often generates controversy, confusion, and tension.

What does it mean?

When people refer to diversity, they may be thinking about ethnicity,

race, and gender. However, diversity is much broader than that. Loden

and Rosener (1991) describe the definition of diversity as “otherness or

those human qualities that are different from our own and outside the

groups to which we belong, yet present in other individuals and groups.”

In this view, diversity can apply to anyone you perceive to be different

from you. But measuring diversity relative to yourself can be misleading.

Merriam‐Webster (2020) defines diversity as “the inclusion of different

types of people (such as people of different races or cultures) in a group

or organization.” A group of people who are very different from you, but

share most of the same identities and experiences with each other, is

likely not diverse, and diversity is a characteristic of the group, not of any

individual.

Dimensions of diversity include, but are not limited to, age, ethnicity,

ancestry, gender, physical abilities and qualities, race, sexual orientation,

educational background, geographic location, income, marital status,

military experience, religious beliefs, parental status, and work

Learning Resource

Diversity in Human Resources

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UMGC (n.d.). Diversity in Human Resources. Retrieved from https://leocontent.umgc.edu/content/umuc/tus/hrmn/hrmn495/2225/learning-
resource-list/diversity-in-human-resources.html#

experience.

How Businesses Benefit from Diversity

There are many arguments for fostering diversity in business, including

the availability of talent, enhancement of innovation, risk avoidance, and

appealing to a global customer base. The business case for diversity is

driven by the view that diversity brings substantial benefits, such as

better decision making, improved problem solving, and greater creativity

and innovation, which in turn contribute to improved product

development and successful marketing to a wider array of customers.

Innovation

It is widely noted that diverse teams lead to more innovation. The logic

behind this is simple: Innovative thinking requires individuals to go

outside of the normal operational paradigms and use diverse perspectives

to reach new and creative ways of thinking. A group of similar individuals

with similar skills is much less likely to stumble across or generate new

ideas that lead to innovation. Similarity can cause groupthink, which

diminishes creativity.

Localization

Some theorize that in a global marketplace, a company that employs a

diverse workforce can better understand the demographics of global

consumers. Therefore, it will be better equipped to thrive than a company

that has less diversity. With global emerging markets demonstrating

substantial GDP growth, organizations need local talent to enter these

marketplaces and communicate effectively. Individuals from a specific

region will be aware of regional needs, and having a similar cultural

background to customers adds considerable value.

Adaptability

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Finally, organizations must be technologically and culturally adaptable in

the modern economy. This is crucial to react to competitive dynamics

quickly and stay ahead of industry trends. Diversity fosters creative

thinking and improved decision making through a deeper and more

comprehensive worldview. These skills are important in adapting to new

circumstances. A company willing to diversify draws from a larger talent

pool and hires individuals with varying skill sets. The value of this,

particularly at the managerial level, is enormous.

The Role of Human Resource Management

When it comes to the workplace, the human resource department has a

great deal of responsibility in managing the overall diversity of the

organization. Human resources should consider diversity within the

following areas:

• hiring

• promotion

• compensation

• training

• employee policies

• legal regulations

• access, which includes language, disability, and other considerations

The role of human resources is to ensure that all employee concerns are

met and that problems are solved as they arise. Human resource

professionals must also pursue corporate strategy and adhere to legal

concerns when hiring, firing, paying, and regulating employees. This

requires careful understanding of both legal and organizational contexts

and meticulous attention to diversity management.

Challenges to Diversity

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There are many individual, interpersonal, and organizational challenges

achieving diversity in the workplace. Some are in communication or in the

implementation of diversity practices, but there are also challenges that

often arise in a diverse workforce:

• Stereotypes. One challenge is the biases individuals in the

organization may have about others. The tendency to stereotype

significantly narrows people’s worldviews.

• Culture. Managers must understand the customs and cultural norms

of employees and ensure that they don’t violate important cultural

rules. The manager’s role is to change the existing organizational

culture to be one of diversity and inclusion.

• Communication. Whether via language or cultural signals,

interpersonal communication can be especially challenging. Ensuring

that HR and other managers have access to resources to help avoid

employee misunderstanding or workplace inefficiencies is critical.

While diversity has clear organizational benefits, an additional

diversity

challenge comes from mismanagement. The legal framework surrounding

diversity in the workplace also includes rules and regulations for fair,

ethical, and nondiscriminatory hiring practices and pay equity. Managers

and human resource professionals must understand and uphold these

regulations. The legal ramifications of missteps can have high fiscal,

branding, and reputation costs.

Recruitment

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The Job Fair

Recruitment of talented employees is essential to any company’s ability to

achieve success and maintain standards within an organization. Recruiting

is actively compiling a diverse pool of potential candidates for

employment. A good recruitment policy will do this in a timely, cost‐

efficient manner. The ultimate goal of any human resources recruitment

policy is to develop relationships with potential employees before they

are actually needed, while keeping an eye on costs. In some industries,

the constant need for talent creates a highly competitive marketplace for

individuals, and it is important for any manager to be aware of these

factors in developing recruitment programs and policies. As baby

boomers retire, victory in the “war for talent” will depend greatly on

recruitment policies.

Methods

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There are two principal ways to recruit workers: internal and external.

Most companies actively use both methods, ensuring opportunities for

existing employees to move up while bringing in new talent. Depending

on the time frame and specialization required, some methods will be more

effective. With a comprehensive job description for every open position,

the company helps to narrow the scope of the search and attract more

qualified candidates, which contributes to search efficiency.

Internal recruitment is often the most cost‐effective method, since it

relies on existing company resources—the internal talent pool—to fill

needs. The following techniques are common for internal recruitment:

• Advertising job openings internally. Using existing employees as a

talent pool carries the advantage of reallocating qualified workers

familiar with the company’s practices and culture while empowering

people within the organization. It also shows the company’s

commitment to, and trust in, its current employees taking on new

tasks.

• Building networks. This can happen in various ways: first, by asking

employees to recommend qualified candidates. Referrals often

include giving bonuses to employees who recommend a successful

hire. Another method of building industry contacts is through

membership in professional organizations to help create a talent pool

via word‐of‐mouth.

External recruitment focuses on searching outside the organization for

potential candidates to expand the talent pool and create diversity.

Although external recruitment can cost more, adding outside perspectives

to an organization can bring many benefits that outweigh the costs. There

are a variety of ways to recruit externally:

• Online recruitment. Finding a talent pool online is quickly becoming

the preferred way of recruiting, since it reaches many applicants

quickly and cheaply. Through its website, a company can compile a

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list of candidates while exposing them to the company’s values and

mission. To use this method successfully, a company must ensure

that postings—and the process for submitting résumés—are simple

and transparent. Another popular way to recruit online is through

career sites. Fee structures vary and listings can even be free. Job

search sites also have searchable databases of potential candidates.

• Advertising. This may incorporate one or many types, from

newspaper classifieds to radio announcements. In 2004, it was

estimated that companies spent $2.18 billion annually on these

types of ads (Kulik, 2004). Before the internet, this was the most

popular form of recruitment. With the decline in newspaper

readership, classified advertising has changed, but can still help

employers fill jobs locally. Also, print ads often appear online as well

(Heathfield, 2018).

• Job fairs and campus visits. Job fairs are designed to bring employers

together in one location to meet with potential employees.

Employers share the cost of hosting, and the job fairs can attract

diverse attendees. Campus visits are a way to find candidates with a

qualification, like a college education, who are looking for the

opportunity to prove themselves.

• Headhunters and recruitment services. These services are designed

to help compile a talent pool; however, they can be extremely

expensive. The rate for the services provided can range from 20 to

35 percent of the new hire’s annual salary. They can, however, be

extremely efficient in providing qualified applicants for specialized or

hard‐to‐fill positions.

No matter how a company decides to recruit, the ultimate test is the

ability of a recruitment strategy to produce viable applicants. Each

manager will face different obstacles in doing this. It is important to

remember that recruiting is not simply undertaken at a time of need for

an organization but rather is an ongoing process that involves maintaining

a talent pool and frequent contact with candidates.

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Screening Candidates

Recruiting needs to attract not only a large number of applicants, but a

group of individuals with the right skills and attributes for the position.

After obtaining a substantial, qualified applicant base, managers need to

identify those with the highest potential for success. Selecting the best

person for the job is critical (Pfeffer & Veiga, 1999). Selective hiring helps

prevent costly turnover of staff and increases the likeliness of high

employee morale and productivity.

When screening candidates, managers need to consider their “fit” with

the company culture and their attitude, not just their technical skills and

competencies. To evaluate fit, it is important for managers to create a list

of criteria for each job before beginning recruiting. Each job description

should be associated with a list of critical skills, behaviors, or attitudes

that will help evaluate job performance later.

Some companies, including Southwest Airlines, hire primarily based on

attitude. “We can change skill levels through training. We can’t change

attitude,” says former Southwest Airlines CEO Herb Kelleher (O’Reilly &

Pfeffer, 2000).

Managers strive to identify the best applicants at the lowest cost.

Companies have a range of methods for screening potential employees.

Managers must determine which system will generate the best results.

Their effectiveness and costs vary.

Besides reviewing basic biographical information about candidates,

companies may conduct background checks or require testing. Because

the latter steps can be costly, applicants are screened before a formal

interview. Equal employment opportunity (EEO) guidelines require

screening processes to be valid, reliable, related to critical aspects of the

job, and nondiscriminatory. Following EEO guidelines helps companies

avoid litigation.

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Interviews

The best interviews follow a structured framework with each applicant

asked the same questions and all candidates rated using the same

process. Since the skills and attributes necessary to succeed in the

position will have already been spelled out, the questions should relate

directly to the job requirements. This helps managers compare apples to

apples, so they can avoid prejudice and ensure that all interviewees are

treated fairly.

Structured interviews help managers avoid illegal questions, such as

asking whether a candidate is pregnant. Many companies choose to use

several rounds of screening with different interviewers to discover

multiple facets of the applicant’s attitude or skills and to develop a more

well‐rounded opinion from multiple perspectives. Involving senior

management in this process signals to applicants that the company is

invested in each new hire and that the culture values all team members.

There are two common types of interviews: behavioral and situational. In

a behavioral interview, the interviewer asks the applicant to reflect on

past experiences (Janz, 1982). The questions are designed to determine

whether an applicant would be a good match for the job, based on

experiences and behaviors in previous positions. Here are two examples

of behavioral interview questions:

“Describe a time when you were faced with a stressful situation. How did

you handle it?”

“Tell me about an instance where you showed initiative and assumed a

leadership role?”

A situational interview requires an applicant to explain how that

individual would handle a series of hypothetical situations. Situational‐

based questions evaluate judgment, ability, and knowledge (Latham &

Saari, 1984). Before a situational interview, it is a good idea for the hiring

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manager to consider possible responses and develop a scoring key. Here

are two examples of situational interview questions:

“You and a colleague are working on a project together. Your colleague

fails to do his agreed portion of the work. What would you do?”

“A client approaches you and claims that she has not received a payment

that supposedly had been sent five days ago from your office. She is very

angry. What would you do?”

Selection Tests

For some companies, understanding the applicant’s personality, values,

and motivation for wanting the job is a critical part of the hiring decision.

Although technical aptitude is required, the candidate’s attitude is often

just as important. Under these circumstances, companies may use

behavioral assessments and personality profiles. The goal of these

assessments is to predict how an individual will interact with coworkers,

customers, and supervisors.

The International Personality Item Pool (IPIP) and Wonderlic are popular

tools that provide an analysis of an applicant’s personality, attitudes, and

interpersonal skills. It is critical that these tests be administered, scored,

and interpreted by a licensed professional. Other assessments may

include cognitive tests, which measure general intelligence; work sample

tests, which demonstrate the applicant’s ability to perform specific job

duties; and integrity tests, which measure honesty.

Background Checks

Background checks are a way for employers to verify the accuracy of

information provided by applicants in résumés and applications.

Information gathered in background checks may include employment

history, education, credit reports, driving records, and criminal records.

Employers must obtain written consent from the applicant before

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conducting a background check. Any information gathered in a

background check should be relevant to

the job.

Improving the Process

Employers may use just one or a combination of the screening methods

to predict future job performance. Whichever option they choose, it is

important for companies to evaluate not just the candidates, but the

effectiveness of the hiring process. Using specific metrics provides a

benchmark for future performance and a way to measure the success of a

particular method.

Success in hiring means bringing employees onboard who will

successfully perform their jobs and fit the organizational culture.

Ineffective hiring leads to high turnover, low employee morale, and

decreased productivity.

Research shows that the “degree of cultural fit and value congruence

between job applicants and their organizations significantly predicts both

subsequent turnover and job performance” (Pfeffer & Veiga, 1998). Thus,

companies need to assess their hiring for technical success as well as

cultural fit. Evaluating the hiring process will help ensure continuing

success and protect human capital—often a company’s most important

asset.

Training, Development, and Rewards

Introduction

In the late Middle Ages in Europe, craft guilds allowed master craftsmen

to employ young people inexpensively in exchange for food, lodging, and

formal training. A young person would spend at least seven years as an

apprentice, supervised by a master craftsman, before being released to

work independently. Although apprenticeship has changed along with the

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rest of the education and training landscape, the need for workers to

acquire and master workplace skills still exists.

Training

Training is teaching or developing, in oneself or others, skills and

knowledge in specific competencies. The goal of training is to improve a

worker’s capability, capacity, productivity, and performance—to help a

worker perform a job better. It requires an investment of resources

—including both time and money—to develop, implement, and evaluate

training programs.

Benefits

Training can be a source of competitive advantage for a company. The

primary benefit results from an accumulation of smaller ones. Training

provides greater skill and knowledge to employees, improving job

performance. This, in turn, creates greater efficiency, fewer errors, and

higher productivity. The result is lower costs and higher profits. Both the

company and the employee can realize rewards.

A well‐trained employee acquires a competitive advantage as a worker.

By participating in training, employees can deepen or expand their

existing skill set and increase their understanding of the organization. A

well‐trained employee may be able to take advantage of internal

promotion opportunities and is more marketable in the wider economy.

Here are some other potential benefits (Duening & Ivancevich, 2003):

• increased job satisfaction and morale

• higher employee motivation

• more efficient processes that lead to financial gains

• better capacity to adopt new technologies and methods

• more innovation in strategies and products

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• reduced employee turnover

• enhanced company image and reputation as a “great place to work”

• risk management (e.g., through training about sexual harassment and

diversity

Needs

The need for training exists in every business. However, the nature of

training varies with the type of business and the operations involved. For

example, a manufacturing company’s workers may need technical skills

training, while an insurance company may emphasize customer service

training. How do you determine training needs? The process begins with

a training needs assessment, or a systematic and objective analysis of

both employee and organizational knowledge, skills, and abilities,

including gaps or areas of weakness.

Generally, training needs assessments are conducted in a three‐step

process.

1. Identify the need. An assessor will seek to answer why the needs

assessment is being conducted, what the desired result is,

the issues

to be addressed through training, and whether training can resolve

the issues

2. Perform a gap analysis. This involves comparing current knowledge,

skills, and abilities with company standards. Training assessors may

use HR records, interviews, questionnaires, or observation to identify

gaps.

3. Assess training options. The assessment ends with a list of options

for training that management can evaluate based on criteria such as

cost and duration.

Not all training is the result of a needs assessment. Unforeseen

circumstances may create an immediate need for training. For example,

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consider the example of Wells Fargo in 2016, when federal regulators

discovered that employees had, unbeknownst to their customers, secretly

created millions of unauthorized bank and credit card accounts to boost

sales figures and generate fees for the bank. The bank fired 5,300

employees and put in place a rapid training and retraining program to

mitigate the legal consequences. Other situations that might compel a

company to conduct impromptu training are changes in laws and natural

disasters.

Types

In general, there are two types of training: on‐the‐job and off‐the job. In

either case, the goal is the acquisition of knowledge, skills, and

competencies that will improve capability, capacity, and

performance.

On‐the‐job training occurs in the workplace using the tools, equipment,

documents, or materials that are required on the job. It is most commonly

focused on technical or skills training.

Off‐the‐job training happens off site. Businesses often view this as a

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disadvantage, since every day spent in training is a day away from work.

However, this type of training has the advantage of allowing people to

concentrate more fully on what they are learning, away from workplace

distractions. It is proven to help people acquire and master new concepts

and ideas.

Professional Development

Professional development is different from training in that it goes beyond

basic qualifications, like technical skills, and is designed to update and

upgrade—as well as maintain—skills throughout one’s working life.

Professional development includes knowledge and skills attained for both

personal development and career advancement. It encompasses all types

of facilitated learning opportunities, ranging from college courses to

conferences and workshops.

Those who take part in professional development run the gamut from

teachers to military officers. They may pursue these opportunities

because of an interest in lifelong learning, a sense of moral obligation, or

• maintain and improve professional competence,

• enhance career progression,

• keep abreast of new technology and practice, and

• comply with professional organization requirements.

Many professions, such as accounting, law, and engineering, require

annual professional development to renew a license or certification.

Professional development approaches include consultation, coaching,

communities of practice, lesson study, mentoring, reflective supervision,

and technical assistance. Professional development may include formal

vocational education—typically postsecondary or technical training

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leading to a qualification or credential to obtain or retain employment. It

also may include preservice or in‐service professional development

programs. These programs may be formal or informal and geared toward a

group or individual participation.

Some companies provide resources for professional development, with

the understanding that it can help develop or enhance process skills

—sometimes referred to as leadership skills—as well as task‐based skills.

Process skills include effectiveness skills, team‐functioning skills, and

systems‐thinking skills.

The twenty‐first century has seen significant growth in online

professional development. Content providers are using technology in

innovative ways, incorporating collaborative platforms such as discussion

boards and wikis to maximize participant interaction. These content

providers offer training on topics from sexual harassment awareness to

promoting diversity in the workplace. The ability to customize training for

a business or industry has placed providers in a position where they can

supplement or even replace other forms of training. Businesses can

purchase access for as many or as few employees as necessary, reducing

training costs. Thus, businesses can provide more training and

professional development opportunities to their employees for less

money and at more convenient times for both the employer and

employee.

Human resource management is all about increasing employee

performance to the highest level within a particular role in the

organization. Consequently, the importance of training to the

organization and as a key function of HR management should not be

understated.

Performance Appraisal

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Purpose

Performance appraisal (PA), or performance evaluation, is a systematic

and periodic process of assessing an employee’s job performance and

productivity against preestablished criteria and organizational objectives.

The evaluation includes organizational citizenship behavior,

accomplishments, potential for future improvement, strengths, and

weaknesses. A PA is typically conducted annually. However, the

frequency and policies surrounding evaluations vary widely from

workplace to workplace. Sometimes an employee will receive an

evaluation when a probationary period ends and then regularly thereafter.

Usually, the employee’s supervisor (and frequently, a more senior

manager) is responsible for evaluating the employee, including a private

conference to discuss the evaluation. The conference may include

feedback, counseling and development, discussing compensation and job

status, and disciplinary decisions.

Historically, performance appraisals have been used by companies for

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many purposes, including salary recommendations, promotion and layoff,

and training recommendations (Kulik, 2004). In general, “performance

elements tell employees what they have to do, and standards tell them

how well they have to do it” (US Department of the Interior, 2004). This

broad definition, however, can allow for appraisals to be ineffective—or

even detrimental—to employee performance. “Second only to firing an

employee, managers cite performance appraisal as the task they dislike

the most,” and employees generally have similar feelings (Heathfield,

2007). One key item that is often forgotten during the appraisal process—

by managers and employees alike—is that the goal is improvement, not

blame or harsh criticism (Bacal, 2003).

Process and Components

One significant problem in creating an appraisal process is that no single

method suits every organization (Kulik, 2004). Establishing an appropriate

process involves significant planning and analysis to provide quality

feedback to the employee. The most crucial task is determining the job

dimensions for evaluating employee performance compared with

accepted standards that affect the performance of the team, business

unit, or company. SMART objectives can be validated, and thus are useful

here.

An evaluation process typically includes one or more of the following

components:

• An assessment of how well the employee is doing. Sometimes this

includes a scale rating indicating strengths and weaknesses in key

areas (e.g., ability to follow instructions, complete work on time, and

work with others effectively). It’s also common for the supervisor

and manager to discuss and determine the key areas.

• Employee goals with a deadline. Sometimes the employee may

volunteer a goal; other times, the goal will be set by the supervisor. A

significantly underperforming employee may be given a performance

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improvement plan detailing specific goals that must be met to keep

the job.

• Feedback from coworkers and supervisors. The employee may also

have the chance to share feelings, concerns, or suggestions about

the workplace.

• Details about workplace standing, promotions, and pay raises.

Sometimes an employee who has performed very well since the last

review period may get a pay increase or be promoted.

Existing Methods

Many methods exist to gauge employee performance, each with strengths

and weaknesses. Here are a few:

• Graphic rating scales. This method involves assigning ratings to

pertinent traits. These may be numerical (1–5), descriptive (below

average, average, above average), or scales for particular traits (poor

↔ excellent). Although ratings can be simple to set up and easy to

follow, they are often criticized for being too subjective, leaving the

evaluator to define broad traits such “leadership ability” or

“conformance with standards” (Kulik, 2004).

• Behavioral methods. This broad category includes several methods

with similar attributes to help identify to what extent an employee

displays certain behaviors. This could include asking a customer to

identify the usefulness of a sales representative’s recommendation.

While extremely useful for jobs where behavior is critical to success,

identifying behaviors and standards for employees can often be very

time‐consuming for an organization (Kulik, 2004).

• 2 + 2. A relative newcomer in performance appraisal methodology,

the 2 + 2 feedback system demonstrates how appraisals can be used

primarily for improvement. By offering employees two compliments

and two suggestions for improvement focused on high‐priority areas,

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creators Douglas and Dwight Allen (2004) suggest that organizations

can become “more pleasant, more dynamic, and more productive.” If

the goal is employee improvement, this system can provide

significant benefits, but if the goals are compensation changes and

rankings, the system provides little benefit.

Appraisal methodologies depend greatly on the type of work: An

assembly worker will require a very different appraisal system from a

business consultant. Developing the appropriate method for each

business unit requires significant planning if performance appraisal is to

help an organization—and its employees—reach their goals.

Compensation

People talk about loving or hating their jobs, but do they ever mean that

they love or hate their compensation? Companies compete for the best

workers—both managers and other employees―through the

compensation they offer. As the business environment becomes more

complex, so does employee compensation. From an accounting

perspective, employee compensation is the cost of acquiring human

resources for running operations.

Salary

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A salary is a form of compensation paid periodically by an employer to an

employee. The amount may or may not be specified in an employment

contract. In general, employees paid a salary do not clock in and out.

Instead, they work as many hours as are needed to accomplish

organizational goals and objectives. Most managers’ salaries are

calculated on a weekly, monthly, or annual basis, rather than hourly. US

employment law distinguishes between exempt (salaried) and nonexempt

(hourly) workers. Employers can require exempt employees to work long

hours without paying overtime.

Approaches to salary continually evolve as one part of a system including

the combined rewards employers offer. This total rewards system, which

includes bonuses, incentive pay, commissions, benefits, perks, and various

other tools, helps employers link rewards to an employee’s measured

performance.

One reward strategy that has become more common for salaried

employees options is the ability to purchase stock in the company. An

employee stock option (ESO) is an option to purchase company stock at a

specified price during a specific time period. The objective is to give

employees an incentive to behave in ways that will boost the company’s

stock price; after their shares are vested, they could potentially sell them

immediately at a profit. In many cases, the ESO represents an amount

considerably higher than the employee’s base salary. For example, in

2015, Satya Nadella, CEO of Microsoft, was paid a salary of $4.5 million,

but his stock options were worth an additional $79.8 million.

Wages

Wage payment systems offer another way for organizations to

compensate employees. Unlike salary, wages are based either on hours

worked or some other measure of production. Following are some

common wage systems:

• Time rate. The worker is paid by the hour for time worked. Beyond a

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set amount (generally 40 hours per week), the worker is paid for

overtime at a higher (typically 1.5 times) rate.

• Differential time rate. Different hourly rates are fixed for different

shifts or different assignments. The most common differential time

rate occurs in production facilities where workers who are assigned

to a graveyard shift (e.g., 11:00 p.m. to 7:00 a.m.) are paid a shift

differential that can range from a few cents to many dollars per hour.

• Piecework. Workers are paid a set amount per unit that they

produce. This type of pay has fallen out of favor with many

businesses since it emphasizes quantity over quality. That said, pay in

today’s gig economy can resemble this production‐based model. An

Uber driver receives a payment for each trip, for example.

The Piecework System in 1912

Commission

Under a straight commission system, employees receives no

compensation from the employer unless they close a sale or transaction.

Real‐estate transactions and car sales are two examples where

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commission is the standard form of compensation. This approach to

compensation has fallen out of favor in many businesses because it can

lead to high‐pressure sales tactics that annoy customers.

Hybrid Systems

Compensation for some positions is a blend of other types of pay with

commissions, tips, and bonuses.

Similar to straight commission, salary plus commission requires an

employee to make a sale or close a deal to earn a portion of the

compensation. However, the employee also earns base pay each pay

period. If the base salary is adequate, it can reduce the use of high‐

pressure sales tactics.

Restaurant servers receive an hourly wage plus tips, but in the US, the

hourly wage can be far below the federal minimum applied to other

workers. This is because diners are expected to make up the difference

through tipping. When they don’t, employers are by law expected to

make up the difference. As with commissions, working for tips can be

beneficial to workers when tips are high, helping them achieve a better‐

than‐minimum wage. Moves to raise the minimum wage for these

workers to a level comparable with other industries can be controversial,

with both employers and employees arguing for and against a higher

minimum wage—and less reliance on tips—for servers (Carman, 2018).

When an employee is paid a salary plus bonus, the bonus is not paid

unless sales‐volume or production goals are met or exceeded. For

example, the manager of a real‐estate firm may be paid a substantial

salary but earn a bonus only if the office exceeds a preestablished sales

goal for the month, quarter, or year. The advantage of a salary plus bonus

is that it’s tied to the performance of a department or division, motivating

the entire team to work together to reach organizational goals or sales

targets.

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Benefits

Compensation includes more than just salary. Benefits are a key

consideration for legal, motivational, and employee relations. Benefits

address a range of employee needs, and they are important for retaining

employees. HR professionals must be familiar with various options for

providing benefits. Following are some of the benefits commonly offered:

• Relocation assistance. Often, hiring people means moving them to a

different location. New talent may come from another city or even

another country, so relocation assistance may entail assistance with

visas, housing, flights, and other moving costs.

• Medical, prescription, vision, and dental plans. In countries with

comparatively few socialized benefits, including the United States,

health insurance is a key, and often legally required, benefit for full‐

time workers.

• Dependent care. As part of the health insurance offered, many

companies allow employees to elect care not only for themselves,

but for their spouse and dependent children as well.

• Retirement plans. Larger employers usually offer employees

retirement‐related benefits. These include 401(k) and 403(b) plans

that allow workers to save some of their earnings for retirement.

They usually provide for various investment options, such as stocks,

bonds and mutual funds. These plans offer tax benefits, and often

employers will make a percentage contribution based on a portion, or

all, of what the employee saves. Sometimes these plans are referred

to as defined contribution plans, since the ultimate retirement

benefit depends on what the employee has contributed. Defined

benefit plans, while still available, have become an increasingly rare

private‐sector benefit in the United States.

• Group term life and long‐term care insurance. Life insurance and

long‐term care benefits help insure workers and their families against

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various types of risks and disasters. These insurance plans protect a

worker’s dependents (and the worker, in the case of long‐term care)

if a serious illness, death, or other tragedy occurs.

• Legal assistance. Less common than the other benefits listed, legal

assistance plans can be established for jobs in which the risk of

personal liability is high. The plans themselves can be expensive, and

they may draw on organizational resources to cover liability.

• Child care. Supporting working parents is increasingly critical to

retaining great talent. Employer‐covered child care helps keep it

affordable for families and enables employees to focus on their work,

which benefits the

employer.

• Transportation benefits. Another common benefit is paid

transportation. Particularly in countries and regions where public

transportation is the norm, it’s quite common for the employer to

pay for some or all of an employee’s commute.

• Paid time off. All organizations in the US must provide paid time off,

vacation, and sick pay under certain circumstances. Many countries

have stringent legislation governing minimum requirements for paid

time off and vacation leave to ensure that employees have a healthy

work‐life balance.

Fringe Benefits

The term fringe benefits was coined by the National War Labor Board

during World War II to describe the various indirect benefits that industry

had devised to attract and retain workers when wage increases were

prohibited. The term perks (from perquisites) is often used colloquially to

refer to discretionary benefits like these.

Perks are often given to employees who are performing well or who have

seniority. Common perks are hotel stays, free refreshments, leisure

activities during the workday, allowances for lunch, and usage of

company cars. When options are available, certain employees may also

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receive first choice on things like job assignments and vacation

scheduling. They may also be tapped first for promotions.

Fringe benefits may also include wellness programs, retail and event

ticket discounts, hotels and resort programs, etc. These are ways to raise

employee satisfaction, corporate loyalty, and worker retention. They are

considered one cost of keeping good employees.

(

https://www.washingtonpost.com/news/food/wp/2018/06/19

/restaurant‐industry‐vows‐to‐fight‐dc‐voters‐move‐to‐raise‐tipped‐

workers‐pay/?utm_term=.53dd7b884701)

Terminations

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https://www.washingtonpost.com/news/food/wp/2018/06/19/restaurant-industry-vows-to-fight-dc-voters-move-to-raise-tipped-workers-pay/?utm_term=.53dd7b884701

Terminations can occur for a range of reasons, both voluntary and

involuntary. The type of termination determines the employee’s future

relationship, if any, with the employer.

Firing

A firing is usually thought to be the employee’s fault and is considered

dishonorable. It can hinder the job seeker’s chances of finding new

employment, particularly if the person has been fired from previous jobs.

Prospective employees don’t always include jobs they were fired from on

their résumés. As a result, employers may view unexplained gaps in

employment or an applicant’s refusal to provide references from previous

employers as red flags.

Layoff

Another type of involuntary termination is a layoff. Usually a layoff isn’t

related to performance, but is the result of economic cycles, company

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restructuring, or closing of the business. Layoffs are not uncommon in

today’s global economy, with rapidly evolving technology and skill

requirements. In fact, a large proportion of workers may be laid off during

their careers for reasons other than their performance.

Layoffs may occur as a result of downsizing (a reduction in the workforce)

or redundancy (the view that certain positions aren’t needed). Positions

may be eliminated because the company wishes to reduce its size or

operations, or it may lack the resources to retain the position. These

reductions may be temporary or permanent.

Attrition

Attrition is a way to reduce the payroll by not replacing workers who

retire or leave the company for other reasons. Sometimes companies will

offer a lump sum—typically a few years of salary—to encourage an

employee, or a group of employees, to resign. Informally, this is

sometimes called a buyout.

Mutual‐Agreement Termination

Some terminations are mutual agreements between the employer and

employee. In many cases, the employer wants the employee to quit but

offers a mutual‐agreement termination agreement instead of firing them.

Sometimes a termination date has been previously agreed to through an

employment contract.

Forced Resignation

Sometimes an employer may degrade an employee’s working conditions

to encourage the worker to leave the company. The employee may be

moved to a different geographical location, be assigned an undesirable

shift, receive fewer work hours, be demoted, or receive work assignments

with uncomfortable conditions. Companies may try to force an

employee’s resignation in other ways, often so they won’t have to fill out

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termination papers in jurisdictions that don’t recognize employment at‐

will, which permits employers to dismiss a worker without warning and

for any reason, without having to establish just cause for termination.

With few exceptions, employees cannot collect unemployment benefits if

they leave voluntarily, but tactics designed to force a resignation may

amount to constructive dismissal, which is illegal in some jurisdictions.

Rehire Following Termination

A worker who has been terminated may or may not be eligible for rehire.

If the decision to terminate was the employee’s, the employer’s

willingness to rehire often depends on their relationship and other terms

of the separation, such as how much notice was provided to the

employer.

When employees depart on good terms, they may be given priority for an

open position later. This is usually true in the case of a layoff. Conversely,

a person can be terminated with prejudice, meaning that an employer will

not rehire the former employee. This judgment can be made for a number

of reasons, including incompetence, misconduct, insubordination, or

attitude.

References

Allen, D. B. & Allen, D. W. (2004). Formula 2+2: The simple solution for

successful coaching. Berrett‐Koehler.

Bacal, R. (2004). How to manage performance: 24 lessons for improving

performance. McGraw‐Hill.

Carman, T. (2018, June 19). Restaurant industry vows to fight DC voters’

move to raise tipped workers’ pay. The Washington Post.

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/restaurant‐industry‐vows‐to‐fight‐dc‐voters‐move‐to‐raise‐

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tipped‐workers‐pay/?utm_term=.53dd7b884701

Duening, T., & Ivancevich, J. (2003). Managing organizations. Atomic Dog

Publishing.

Heathfield, S. (2007, March). Performance appraisals don’t work. Journal

for Quality and Participation (30)1, 6–9. Retrieved from

http://asq.org/qic/display‐item/index.html?item=20975

Heathfield, S.M. (2018, March 2). How to post jobs online: Ways to post

jobs online to maximize your chances of attracting great talent.

The Balance Careers. Retrieved from

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1917752)https://www.thebalancecareers.com/how‐to‐post‐jobs‐

online‐1917752

Heathfield, S.M. (2019). Recruiting stars: Top ideas for recruiting great

candidates. The Balance Careers. Retrieved from

(https://www.thebalancecareers.com/top‐ideas‐for‐recruiting‐

great‐candidates‐1916798)https://www.thebalancecareers.com

/top‐ideas‐for‐recruiting‐great‐candidates‐1916798

Janz, T. (1982, October). Initial comparisons of patterned behavior

description interview versus unstructured interviews. Journal of

Applied Psychology, 67(5), 577–580.

Kulik, C. (2004). Human Resources for the Non‐HR Manager. Lawrence

Erlbaum Associates.

Latham, G. P., & Saari, L. M. (1984). Do people do what they say? Further

studies on the situational interview. Journal of Applied Psychology,

69(4), 569–573.

Loden, M., Rosener, J.B. (1991). Workforce America! Managing employee

diversity as a vital resource. Business One Irwin.

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https://www.thebalancecareers.com/how-to-post-jobs-online-1917752

https://www.thebalancecareers.com/top-ideas-for-recruiting-great-candidates-1916798

Merriam‐Webster. (2020). Diversity. Merriam‐Webster.com Dictionary.

Retrieved from https://www.merriam‐webster.com/dictionary

/diversity

O’Reilly, C. A., & Pfeffer, J. (2000). How great companies achieve

extraordinary results with ordinary people. Harvard Business

School Press.

Pfeffer, J., & Veiga, J. F. (1999, May). Putting people first for

organizational success. Academy of Management Executive, 13(2),

37–48. doi: 10.5465/AME.1999.1899547

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Retrieved from http://www.doi.gov/hrm/guidance

/370dm430hndbk

Licenses and Attributions

Chapter 15: Human Resource Management

(https://courses.lumenlearning.com/wm‐introductiontobusiness

/chapter/diversity‐in‐human‐resources/) by Linda Williams and Lumen

Learning from Introduction to Business is available under a Creative

Commons Attribution 4.0 International (http://creativecommons.org

/licenses/by/4.0/) license. UMGC has modified this work and it is

available under the original license.

All links to external sites were verified at the time of publication. UMGC is not responsible for the

validity or integrity of information located at external sites.

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Diversity in Human Resources

http://creativecommons.org/licenses/by/4.0/

Corporate Social Responsibility

What you’ll learn to do: Explain the concept of
corporate social responsibility

Corporate social responsibility (CSR) is a recent, proactive form of

practicing business ethics that is playing an increasingly significant role in

corporate missions and strategies.

Learning Resource

Corporate Social Responsibility

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UMGC (n.d.). Corporate Social Responsibility. Retrieved from https://leocontent.umgc.edu/content/umuc/tus/hrmn/hrmn495/2225/learning-
resource-list/corporate-social-responsibility.html

For many people, pollution is an everyday reality.

Learning Outcomes

• Define corporate social responsibility (CSR)

• Describe the impact of CSR on direct and indirect stakeholders

• Give examples of CSR

• Discuss controversies surrounding CSR

The Origins of Corporate Social Responsibility

President Calvin Coolidge declared in the roaring 1920s that “the chief

business of the American people is business.” It was a popular observation

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in a time of great economic prosperity, when issues such as energy

security and climate change were practically nonexistent.

Almost a century later, things are very different. Now more than ever,

environmental concerns are paramount, and citizens are calling on private

companies to take responsibility for their roles in generating pollution and

other actions that endanger the environment. A growing number of

people believe that companies ought to do more than simply follow the

letter of the law and meet the bare minimum of regulatory requirements.

The notion of CSR has arrived and is growing across the globe.

President Coolidge, like many American presidents before and since,

worked to keep government out of business affairs. But starting in the

1960s and 1970s, the environmental impact of an ever‐expanding

economy was growing, pouring waste into oceans and the landscape,

generating more and more citizen protest. The result was a wave of

legislation designed to reduce the pollution that was a product of many

industrial operations. Those laws effectively decreased pollution

emissions, and they now constitute a large part of the backbone of the

the American regulatory framework. But despite these regulations, excess

pollution continues to be a challenge. And there are even larger problems

on the horizon.

Even though today’s businesses are more efficient and use fewer

resources to manufacture goods—thanks to technological advances—

many natural ecosystems continue to suffer. This is the result of a

continual rise in economic activity to meet the demands of expanding,

increasingly wealthy populations worldwide.

In recent years, a growing number of citizens in the US and around the

world have called on private enterprise to take more action to address

their environmental footprint—action that goes beyond simply complying

with regulations. The result has been a new movement known as

corporate social responsibility, or CSR.

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CSR Defined

CSR can be simply and broadly defined as the ethical role corporations

play in the societies in which they operate. The aim of CSR is to increase

a company’s long‐term profits and shareholder trust by upholding and

adhering to high ethical standards. By taking responsibility for the

consequences of their actions, companies can reduce their business and

legal risks, and promote their public image.

A company’s stakeholders—including its employees, unions, investors,

suppliers, consumers, local and national governments, and communities—

all have an interest in limiting the negative environmental consequences

of corporate activities such as construction and manufacturing. For many

companies, CSR means manufacturing products in a way that doesn’t

harm the environment and protects the consumer from potentially

hazardous materials. One such company that has staked its reputation on

ethical manufacturing is LUSH Cosmetics.

https://youtu.be/yoGMEX1ZLoc (https://youtu.be/yoGMEX1ZLoc)

Demand for CSR

There are at least three drivers pushing businesses to practice CSR

include:

• Increased pressure from sonsumers. They are demanding more from

the businesses that get their hard‐earned money. Businesses that are

perceived as valuing more than their bottom line are gaining favor

with consumers, particularly in North America. Citizens there are

more likely to vote with their wallets and refuse to purchase from

companies whose social and environmental practices they disagree

with. In fact, 42 percent of North American consumers report having

punished socially irresponsible companies by not buying their

products (International Institute for Sustainable Development).

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As the following video shows, the company has been forced to react to

increasing consumer pressure.

https://youtu.be/_Z9es2kXLlY (https://youtu.be/_Z9es2kXLlY)

• Pressure from Shareholders and Investors. In the US, where 61

percent of people own shares in private companies, more than a

quarter say they have bought or sold their shares on the basis of a

company’s social performance. As the table below illustrates, a

similar trend has emerged in Canada, Japan, Britain, and Italy.

Percentage of share‐owners who have bought or sold shares because of

a company’s social performance, by country

Country %

Italy 33%

USA 28%

Canada 26%

Japan 22%

Britain 21%

France 18%

Source: International Institute for Sustainable Development

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Country %

Source: International Institute for Sustainable Development

Germany 18%

• Supply Chain Pressure. As consumers pay closer attention to the

social responsibility of retailers and service providers, they are also

scrutinizing the details of their supply chains. For example, Apple has

come under scrutiny and criticism for the poor working conditions

and environmental hazards in their assembly facilities in China. Even

though these facilities are outside of the United States and are

separate corporate entities, Apple has spent considerable resources

defending its reliance on such suppliers. Other companies such as

IKEA, the Swedish international retailer of furniture and household

goods, takes a proactive approach to CSR both internally and within

its supply chain. IKEA’s website invites consumers and interested

parties to read the company’s sustainability reports and its policy

statement on “People and Planet.”

Regardless of where the pressure originates, companies are finding that

ignoring their social and environmental impact is ultimately bad for

business.

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Nike sponsored a campaign to address the effects of HIV in Africa.

Common Approaches to CSR

Not all companies approach CSR the same way. It depends on their

resources, available assets, and corporate culture. Some companies

perceive more benefit from one approach to CSR than another. The

personal beliefs and priorities of senior management and ownership also

influence the company’s approach to social responsibility. Below are some

different approaches to CSR.

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Corporate Philanthropy

Corporate philanthropy refers to a corporation’s gifts to charitable

organizations. Despite claims that the that such donations have no strings

attached, that is not always the truth. At minimum, most corporations

expect their donations to be publicly acknowledged, which generally

generates positive press. When corporations make large cash gifts to

universities or museums, they are also usually rewarded with a plaque or

with the naming of a building in their honor. This further burnishes the

corporation’s public image. These cases have little to do with corporate

philanthropy and are more the product of marketing or public relations.

Cause‐Related Marketing

Cause‐related marketing occurs when a company aligns its sales with a

charitable campaign. One example, the “Red Campaign,” in which

companies such as Nike and Gap pledge to contribute profits from the

sale of certain red products to a program for African development and the

relief of AIDS‐related social problems. Cause‐related marketing enables

companies to promote their brands while also promoting awareness

about a social cause.

Another example is images of the pink ribbon, used to promote breast

cancer awareness and the search for a cure. The pink ribbon has been

broadly used in a wide variety of programs whose ultimate aim is to

promote a product. For example, companies such as Estée Lauder, Avon,

New Balance, and Self all use the pink ribbon to advertise their

contributions to breast cancer research. Estée Lauder has made support

for breast cancer awareness one of the defining features of its corporate

philanthropy. Thus, the company frequently refers to its charitable

contributions in its corporate communications and public relations

materials.

Sustainability

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The concept of sustainability has become nearly synonymous with the

goal of environmentalism in corporate America: for companies to operate

without compromising the natural world. Becoming truly sustainable is a

challenging goal for any company, and many environmentalists maintain

that no corporation operates fully sustainably, since all use energy and all

produce waste products such as garbage and industrial chemicals.

Whether or not true sustainability is attainable anytime in the near

future, the development and promotion of sustainability strategies have

become paramount to most of today’s large corporations, whose websites

advertise their commitment to sustainability and responsible

environmental practices. No corporation or corporate executive today is

overheard saying they don’t care about the environment. Nevertheless,

their actions can betray their words.

Social Entrepreneurship

Social entrepreneurship (or social enterprise) refers to using the proceeds

of a business to attain laudable social goals. For example, Blake Mycoskie

created TOMS Shoes largely in reaction to his travels in Argentina, which

had exposed him to devastating poverty that left many school‐age

children without shoes. An important part of TOMS shoes’ corporate

mission is its pledge to provide a free pair of shoes for every pair

purchased. This business model has been adopted by others, including the

popular online eyewear brand, Warby Parker.

The difference between social entrepreneurship and CSR is that a

company’s commitment to having a positive social impact is built into the

mission of the company at its founding. Other examples of companies

founded on social entrepreneurship include The Body Shop, Ben & Jerry’s

ice cream, and Newman’s Own:

• The Body Shop was founded by noted activist Anita Roddick who

insisted all her products be derived from ingredients that were

natural, organic, and responsibly sourced. Her employment policies

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allow each employee to take one workday off a month to participate

in social or community projects.

• Ben & Jerry’s was founded to promote the use of organic, locally

produced food. The company’s founders implemented a policy that

stipulated company executives earn no more than seven times the

salary of factory line workers (although this policy was eventually

relaxed when it became difficult to recruit a competent CEO at those

wages). Over the years, Ben & Jerry’s has engaged in high‐profile

political activism in which they also encourage their employees to

participate, such as protesting the building of the Seabrook nuclear

power plant in Vermont.

• Newman’s Own was founded by film actor Paul Newman and his

friend A. E. Hotchner with the goal of selling wholesome products

and donating 100 percent of their profits to charitable ventures. To

date, Newman’s Own has given away more than $200 million.

Social Marketing

Social marketing refers to the use of business marketing techniques to

pursue goals for the common good. Often, governments and nonprofit

organizations make use of social marketing to communicate and

emphasize their messages to a wide audience. Classic examples are

powerful TV commercials warning of the dangers of unsafe driving or

failing to wear seat belts. Cinematic techniques are typically employed in

these commercials to portray dramatic, arresting images of crumpled cars

and bodies, and children and mothers crying.

Social marketing typically aims to convince citizens to drive safer, eat

better, report child and domestic abuse, and avoid various forms of

criminality and drug use. As with ordinary advertising, social marketing

can seem overdone or maudlin, and some social marketing ads have been

mocked or considered silly. For example, former First Lady Nancy Reagan

participated in a social marketing campaign that urged young people to

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“Just Say No” to drugs, an approach that was ridiculed by many as

inappropriately simplistic. Activist Abbie Hoffman said that telling drug

users to “just say no” to drugs was like telling manic‐depressives to “just

cheer up.”

CSR: Commercial or Commitment?

From the beginning, CSR has been the subject of debate. CSR’s critics

argue that the main objective of companies is to maximize the return on

shareholders’ investment. They point to the legal system as the more

appropriate place for regulating businesses’ social conduct. Businesses

are already performing a key public service by providing the jobs and

services that society needs.

Other critics assert that many CSR activities are really just publicity stunts

and corporate greenwashing. Greenwashing refers to when companies

exaggerate or misstate the impact of their environmental actions or

promote products as being “eco‐friendly” when they are not.

Supporters of CSR contend that there are significant profit‐related

benefits to socially responsible behavior. They say companies use CSR

activities to establish partnerships with communities to increase company

influence and play a bigger role in local and national legislation.

Trends indicate that CSR is gathering force and is here to stay. More and

more leading companies in America and worldwide are releasing

sustainability reports. And new industries like clean energy are providing

social and economic benefits while also fighting climate change. The

result has been called one of the greatest commercial opportunities in

history.

As the importance and nature of CSR continue to be a topic of ongoing

debate and controversy, consider the following facts and viewpoints

regarding CSR in general, and its implications for specific issues:

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Sincerity or Public Relations?

• Facts: CSR is a rapidly growing object of study in universities and

business schools. Most large corporations have adopted CSR

programs.

• Controversy: Is CSR a good thing or is it corporate window dressing?

• In favor: CSR motivates corporations to address social problems,

energizes and rewards workers, and strengthens ties to the

community while also enhancing a company’s image.

• Against: Surveys show that citizens are more concerned about

corporations treating their workers well and obeying laws than about

engaging in philanthropic activities. People worry that CSR may allow

corporations to distract consumers and legislators from the need to

tightly regulate corporations.

Beneficial or Boasting?

• Facts: There is a scientific consensus that global warming and climate

change represent an enormous threat to mankind.

• Controversy: Can CSR really have a significant impact on climate

change, or is it just a public relations vehicle for companies and a

distraction from the need for stronger government action, such as a

carbon tax?

• In favor: Corporations can have a major impact in the battle against

global warming by reducing their large carbon footprints,

encouraging other corporations to follow suit, and helping discover

and develop alternative sources of energy.

• Against: Companies spend a lot of advertising money to boast about

their small actions against global warming, but many of these

companies are in industries—such as fossil fuels or automobiles—that

produce the most greenhouse gases to begin with. Self‐serving

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claims about concern over climate change are often simply

greenwashing campaigns meant to distract us from the need for

more effective measures through taxation and regulation.

Defining Personhood

• Facts: Most large corporations spend money on lobbying in an effort

to influence legislators and regulators. In the Citizens United

decision, the Supreme Court ruled that companies are “corporate

persons.” Accordingly, they now have the right to the same freedom

of speech protections—and the right to lobby with cash—as do

ordinary citizens. This has significantly increased the flow of

corporate money into Washington.

• Controversy: Many citizens are outraged that the justice system now

gives multinational corporations the same rights as ordinary people

on the grounds that corporations are “persons.” However, others

point out that The New York Times and CNN are also corporations,

and that it could have a chilling effect on freedom of speech if all

corporations were legally constrained from speaking out freely.

• In favor: As major employers and technological innovators,

corporations benefit society. They should be free to oppose

inefficient and cumbersome government regulations and taxation

that can limit the benefits they provide. Freedom of political speech

is so essential to our society, we should be cautious about limiting it

in any way.

• Against: Corporations are not “persons” in the same sense that

humans are, and therefore, they should not enjoy the same freedom

of speech protections. Since corporations can become vastly

wealthier than ordinary citizens, allowing them to participate without

parameters in politics will allow them to bend laws and regulations to

their will.

In each of the debates outlined above, there are intelligent and well‐

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informed people on both sides of the issue. How CSR is defined and

practiced differs for each enterprise. But for all those companies, the

view seems to be that CSR programs are a good investment.

Case Study: Social Entrepreneurship at TOMS’
shoes

TOMS’ shoes incorporated philanthrophy into its business model.

While there is no universally accepted definition of social entrepreneur,

the term is typically applied to an individual who uses market‐based ideas

and practices to create social value in the form of the enhanced well‐

being of individuals, communities, and the environment. Unlike ordinary

business entrepreneurs who base their decisions solely on financial

returns, social entrepreneurs incorporate the objective of creating social

value into their business models.

Social entrepreneurship has become exceedingly popular in recent years,

and a number of prestigious business schools have created specific

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academic programs in the field. Social entrepreneurs are lauded for their

ability to effect far‐reaching social change through innovative solutions

that disrupt existing patterns of production, distribution, and

consumption. Prominent social entrepreneurs are celebrated on magazine

covers, praised at the World Economic Forum in Davos, awarded millions

of dollars in seed money from “angel” investors, and applauded as

harbingers of new ways of doing business. But are they actually effecting

positive social change?

Social entrepreneurship can undeniably arouse a striking level of

enthusiasm among consumers. Blake Mycoskie, social entrepreneur and

founder of TOMS shoes, tells the story of a young woman who accosted

him in an airport, pointing at her pair of TOMS while yelling, “This is the

most amazing company in the world!” Founded in 2006, TOMS

immediately attracted a devoted following with its innovative use of the

so‐called One for One business model, in which each purchase of a pair

of shoes triggers the gift of a free pair of shoes to an impoverished child

in a developing country.

Widespread enthusiasm about social entrepreneurship is perhaps

emblematic of increased global social awareness, evidenced by increased

charitable giving worldwide. A 2012 study revealed that

• 83 percent of Americans wish brands would support causes;

• 41 percent have bought a product because it is associated with a

cause (a figure that has doubled since 1993);

• 94 percent say that, given the same price and quality, they would be

likely to switch brands to one that represented a cause; and

• 90 percent think companies should consider giving to the

communities in which they do business.

Does Social Entrepreneurship Live Up to its
Promise?

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Despite the eager reception from consumers, critics of social

entrepreneurship have raised concerns about the creation of social value

in a for‐profit context. TOMS is sometimes mistaken for a charity because

it donates shoes to children in developing countries, but it is also in the

business of selling shoes. The company earns an estimated $300 million a

year. While companies are starting to look more like charities, nonprofit

organizations are also increasingly relying on business principles to

survive an uncertain economy in which donors expect to see tangible

results from their charitable contributions.

The difficulty of gauging social outcomes complicates the matter. There is

little concrete statistical data on the impact of social entrepreneurship.

Thus, there is little agreement on its precise definition, making it difficult

to say to what extent any given company is an example of social

entrepreneurship. TOMS’ Chief Giving Officer, Sebastian Fries, recently

told the New York Times that the company is “not in the business of

poverty alleviation.” Does this mean that increased social value is merely a

happy byproduct of the business of selling shoes? If so, what specifically

makes Blake Mycoskie a social entrepreneur?

Some critics go so far as to suggest that social entrepreneurs are merely

using public relations tactics to engage in social or environmental

greenwashing, thus taking advantage of consumers’ desire to do good. In

some cases, it has been argued, social entrepreneurs can even do more

harm than good. Lacking a full understanding of the socioeconomic and

cultural dynamics of the developing countries in which they intervene,

social enterprises can in fact undermine fragile local markets and foster

dependence on foreign assistance.

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Answer the following questions to see how well you

understand the topics covered in this section. This short

quiz does not count toward your grade, and you can retake

it as many times as you wish. Use this quiz to decide

whether to study the section further or move on.

Choose the BEST answer.

Question 1

Companies today are held to higher standards than ever

before. Individuals and groups of consumers consider not

only the quality and price of a company’s products, but also

the company’s ________.

marketing accuracy

commitment to environmental and social concerns

production process

Question 2

Consumers wishing to encourage corporate social and

environmental responsibility can

vote with their wallet

encourage their family members to shop local

shop at Walmart

Check Your Knowledge

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Question 3

Examples of approaches to corporate social responsibility

include

Facebook, Twitter, and LinkedIn

product, price, promotion, and placement

corporate philanthropy, cause‐related marketing,

sustainability

References

International Institute for Sustainable Development. Corporate Social

Responsibility Monitor. Retrieved from https://www.iisd.org

/business/issues/sr_csrm.asp

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