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Strategic Human
Resource
Management
Fifth Edition
Australia • Brazil • Mexico • Singapore • United Kingdom • United States
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Contents | vii
READING 6.1: Sexual Harassment Versus Workplace Romance: Social Media Spillover

and Textual Harassment in the Workplace 205
Reading 6.1 Appendix 219
7 Employment Law 221

Employment-at-Will 222
Scope of Laws 223
Federal Antidiscrimination Laws 223
Equal Pay Act 224
Civil Rights Act of 1964 225
Age Discrimination in Employment Act of 1967 226
Rehabilitation Act of 1973 226
Pregnancy Discrimination Act of 1978 226
Americans with Disabilities Act of 1990 227
Civil Rights Act of 1991 228
Family and Medical Leave Act of 1992 228
Genetic Information Nondiscrimination Act of 2008 230
Enforcement of Federal Laws Under the EEOC 231
Executive Orders 234
Affirmative Action 234
Sexual Harassment 235
What Sexual Harassment Is 236
Problems in Managing Sexual Harassment 237
Strategy for Managing Sexual Harassment 239
Complications Abroad 240
Trends in Employment Litigation 240
Conclusion 243 / Critical Thinking 243 / Exercises 244 / Chapter References 244
Reading 7.1: In Defense of Preference 246
Reading 7.2: The Management of Organizational Justice 252
Part two
Implementation of Strategic Human Resource Management
8 Staffing 267
Recruiting 268
Temporary Versus Permanent Employees 268
Internal Versus External Recruiting 269
When and How Extensively to Recruit 271
Methods of Recruiting 272
Selection 278
Interviewing 279
Testing 282
References and Background Checks 286
viii | Contents
International Assignments 287

Documentation of Employment Eligibility 288
New Trends in Staffing 288
READING 8.1: Recruiting Practices in Transition 296
9 Training and Development 303

Benefits of Training and Development 306
Planning and Strategizing Training 307
Needs Assessment 307
Objectives 308
Design and Delivery 309
Evaluation 310
Organizational Development 312
Integrating Training with Performance Management Systems and Compensation 317
Reading 9.1: Strategic Organizational Development Interventions:
A Case of Microsoft Corp. Limited 320
10 Performance Management and Feedback 327

Use of the System 329
Who Evaluates 331
What to Evaluate 334
How to Evaluate 337
Measures of Evaluation 338
Other Considerations 342
Why Performance Management Systems Often Fail 342
Addressing the Shortcomings of Performance Management Systems 343
Reading 10.1: The Performance Management Revolution; The focus is shifting from
accountability to learning 348
11 Compensation 357
Equity 358
Internal Equity 361
External Equity 365
Individual Equity 366
Legal Issues in Compensation 369
Executive Compensation 372
READING 11.1: Exposing Pay Secrecy 376
READING 11.2: The Development of a Pay-for-Performance Appraisal System for
Municipal Agencies: A Case Study 390
Contents | ix
12 Labor Relations 407

Why Employees Unionize 410
The National Labor Relations Act 411
Behavior During Organizing Campaigns 412
Collective Bargaining 413
Failure to Reach Agreement 414
Unions Today 415
READING 12.1: Social Media, Employee Privacy and Concerted Activity: Brave New
World or Big Brother? 420
READING 12.2: The Labor Movement and the Dilemma of Direct Confrontation 427
13 Employee Separation and Retention Management 435

Reductions in Force 436
Turnover 440
Retirement 446
Alumni Relations 447
READING 13.1: Retaining Talent: Replacing Misconceptions with Evidence-Based
Strategies 451
14 Global Human Resource Management 467

How Global HRM Differs from Domestic HRM 469
Assessing Culture 469
Strategic HR Issues in Global Assignments 472
Repatriation 476
The European Union 478
Mexico and Canada 479
China 480
India 481
READING 14.1: In the Eye of the Beholder: Cross Cultural Lessons in Leadership from
Project Globe 484
SUBJECT INDEX 507

NAME INDEX 511
COMPANY INDEX 512
PR EFAC E
Since the publication of the fourth edition of this text, heightened attention continues to be shown
and greater appreciation paid toward the value of strategic human resource management in orga-
nizations. Boards of directors, business owners, stockholders, and senior executives are gaining a
greater understanding of the relationship between HR and organizational, market, and financial
performance as cutting-edge research illustrates the connection between HR practices and firm
performance.
Scholarly HR-related publications continue to thrive, while practitioner-oriented management
publications—traditionally dominated by articles focused on marketing and finance—are publishing
an increasingly significant number of articles on human resource management, particularly strategic
aspects of HR. Within the academy, there continues to be a significant increase in the number of HR-
related articles in journals focused on general management and even those related to strategy. No
longer is HR simply relegated to specialized journals that deal with HR. This significant movement
toward the publication of more HR-focused articles in both the general management academic and
practitioner literatures illustrates clearly that executives are realizing the role HR plays in an orga-
nization’s success as well as the fact that HR is a general management responsibility and its effective
practice a key to successful operating results.
Also since the publication of the fourth edition, the resources that are available to those of us
who teach have greatly expanded. The Society for Human Resource Management, the world’s largest
HR professional association, has continued to develop programs and materials to support HR educa-
tion which include (1) curriculum guidebooks and templates for both undergraduate and graduate
programs; (2) dozens of cases and learning modules to assist with course design and delivery; and
(3) a significant database of the latest research and position papers on critical issues in strategic HR,
which allow instructors to remain very current on trends, best practices, and legislative and court
activity. Much of this material is available to nonmembers at the SHRM Web site, www.shrm.org. In
addition, the Journal of Human Resources Education (JHRE), continues to publish exciting original
work that supports HR education.
Organization and Content

Strategic Human Resource Management, 5e is designed for: (1) graduate students enrolled in survey
courses in human resource management who would benefit from a general management approach
to strategic HR; (2) working professionals enrolled in specialized HR and executive programs as a
capstone offering; and (3) undergraduate students enrolled in a capstone course in an HR degree
program or those seeking an advanced-level HR course to complement their strategy course.
The text is organized into two sections. The first section, Chapters 1–7, examines the context
of strategic HR and develops a framework and conceptual model for the practice of strategic HR.
The chapters in this section examine employees as “investments”; explore trends that affect human
resource management practice; describe what strategic HR is, particularly in contrast to more tradi-
tional approaches to HR; and look at how both the design of work systems and relevant employment
laws influence the practice of managing people in organizations. The second section, Chapters 8–14,
examines the actual practice and implementation of strategic HR through a discussion of strategic
issues that need to be addressed while developing specific programs and policies related to the tradi-
tional functional areas of HR. Covered within this section are strategic issues related to staffing, train-
ing, performance management, compensation, labor relations, employee separation, and managing
a global workforce. Both the integrative framework that requires linkage between and consistency
among these functional HR activities and the approach toward writing about these traditional func-
tional areas from a strategic perspective distinguish the text from what is currently on the market.
x Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Preface | xi
Chapter Features
All chapters contain the following:
• an opening “in practice” vignette featuring a well-known organization to introduce the chap-
ter topic as well as numerous additional vignettes within each chapter that illustrate pertinent
chapter concepts
• carefully selected readings that are integrated within the text discussion
• end-of-chapter discussion questions and exercises designed to apply chapter content and facili-
tate discussion of issues
New to the Fifth Edition

As the field of strategic human resource management has evolved since the fourth edition, this text
has similarly done so in response. Many of the end-of chapter readings are new to this edition. The
retained readings are those that have become “classics” and are presented alongside those that rep-
resent the latest in thinking and practice in human resource management. There are also numerous
new original exhibits that explain chapter concepts; 17 new “in practice” vignettes that describe stra-
tegic HR practices in a wide variety of organizations; and 73 new references.
There is also significant new content in each of the 14 chapters. This includes, but is not limited
to, new or greatly expanded coverage of HR analytics; sexual orientation, gender identity, and related
legislation; religious expression; employee engagement; alternative dispute resolution; medical mari-
juana; independent contractor status; transparency in compensation; and union recruiting strategies
as well as legal and legislative updates with the latest court rulings on existing laws.
Instructor’s Resources
Also available are an Instructor’s Manual and PowerPoint slides to accompany the book which were
prepared by the author. They can be accessed by visiting www.cengage.com/login. The Instructor’s
Manual includes chapter outlines, answers to end-of-chapter content, and suggested topics for stu-
dent papers, while the PowerPoint slides offer all main text concepts to encourage classroom discus-
sion and classroom engagement.
MindTap: Empower Your Students

MindTap is a platform that propels students from memorization to mastery. It gives you complete
control of your course, so you can provide engaging content, challenge every learner, and build stu-
dent confidence. Customize interactive syllabi to emphasize priority topics, then add your own mate-
rial or notes to the eBook as desired. This outcomes-driven application gives you the tools needed to
empower students and boost understanding and performance.
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ciently with interactive multimedia, assignments, quizzes, and more. Give your students the power to
read, listen, and study on their phones, so they can learn on their terms.
xii | Preface
Empower Students to Reach Their Potential

Twelve distinct metrics give you actionable insights into student engagement. Identify topics trou-
bling your entire class and instantly communicate with students who are struggling. Students can
track their scores to stay motivated toward their goals. Together, you can be unstoppable.
Control Your Course—and Your Content

Get the flexibility to reorder textbook chapters, add your own notes, and embed a variety of content,
including Open Educational Resources (OER). Personalize course content to your students’ needs.
They can even read your notes, add their own, and highlight key text to aid their learning.
Get a Dedicated Team, Whenever You Need It

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your course and tailor it to your specific objectives, so you’ll be ready to make an impact from day
one. Know we’ll be standing by to help you and your students until the final day of the term.
ABO U T T HE AU T H O R
Jeffrey A. Mello
Rhode Island College
Jeffrey A. Mello is Dean of the School of Business and Professor of Management at Rhode Island
C ollege. He previously held faculty and administrative positions at Barry University, Towson
University, the George Washington University, the University of California at Berkeley, Golden Gate
University, and Northeastern University, from where he received his Ph.D. He has been a recipient
of the David L. Bradford Outstanding Educator Award, presented by the Organizational Behavior
Teaching Society, and has received international, national, and institutional awards for his research,
teaching, and service. He has authored six books and published more than 100 book chapters, jour-
nal articles, and conference papers in journals such as the JOURNAL OF BUSINESS ETHICS, BUSI-
NESS HORIZONS, INTERNATIONAL JOURNAL OF PUBLIC ADMINISTRATION, BUSINESS
& SOCIETY REVIEW, JOURNAL OF EMPLOYMENT DISCRIMINATION LAW, SETON HALL
LEGISLATIVE JOURNAL, JOURNAL OF INDIVIDUAL EMPLOYMENT RIGHTS, PUBLIC PER-
SONNEL MANAGEMENT, EMPLOYEE RESPONSIBILITIES AND RIGHTS JOURNAL, LABOR
LAW JOURNAL, JOURNAL OF LAW AND BUSINESS, and the JOURNAL OF MANAGEMENT
EDUCATION. He has served as an editor for the JOURNAL OF MANAGEMENT EDUCATION,
JOURNAL OF LEGAL STUDIES EDUCATION, and EMPLOYEE RESPONSIBILITIES AND
RIGHTS JOURNAL as well as on numerous editorial boards. He is a member of the Academy of
Legal Studies in Business, Organizational Behavior Teaching Society, Society for Human Resource
Management, and Academy of Management.
xiii
The Context of Strategic Human
Resource Management
PA R
T 1
Chapter 1
An Investment Perspective of Human Resource
Management
Chapter 2
Social Responsibility and Human Resource
Management
Chapter 3
Strategic Management
Chapter 4
The Evolving/Strategic Role of Human Resource
Management
Chapter 5
Strategic Workforce Planning
Chapter 6
Design and Redesign of Work Systems
Chapter 7
Employment Law
C hapter 1
An Investment Perspective of
Human Resource Management
LEARNING
OBJECTIVES Human Resources at Nordstrom
• Understand the sources of How can a retailer gain a competitive advantage in a cut-throat marketplace?
employee value Middle- and high-end retailers generally locate in close proximity to each other
• Gain an appreciation of the and often carry similar—but not identical—merchandise. Consequently, their
importance of human capital sales and profit margins are usually in tandem. Nordstrom, however, has consis-
and how it can be measured tently produced above-industry-average profits and continues to be profitable
and analyzed when its competitors’ profits are falling or flat.
• Understand how competitive The key to Nordstrom’s success lies with the different way it manages its
advantage can be achieved employees. Sales employees are known as “associates” and considered the orga-
through investment in nization’s most valuable asset. The company’s success is rooted in its strategy
employees of providing superlative customer service. Associates are encouraged to act as
entrepreneurs and build strong personal relationships with customers, or “clients.”
• Gain an appreciation of
In fact, many clients shop only with a particular Nordstrom associate and call in
metrics, their measures, and
advance to determine the associates’ schedules or to make appointments.
their usefulness
Nordstrom’s strategy involves a heavy investment in the organization’s sales
• Understand how metrics force. Nordstrom provides associates with extensive training on merchandising
relate to analytics and how and product lines and offers high compensation. Its commitment to its employees
HR analytics are used in is evident from the fact that the company’s organization chart is depicted inverse
organizations from that of a traditional retailer. Associates are at the highest level on the chart,
• Understand the obstacles that followed by department and merchandise managers and, finally, executives. This
prevent organizations from depiction cements the organization’s philosophy that the customer is king. All
investing in their employees efforts of senior-, middle-, and lower-level managers should support the efforts of
the sales force.
4 Part 1 The Context of Strategic Human Resource Management
E
ffective organizations are increasingly realizing that of the varied factors that contribute to per-
formance, the human element is clearly the most critical. Regardless of the size or nature of an
organization, the activities it undertakes, and the environment in which it operates, its success
is determined by the decisions its employees make and the behaviors in which they engage. Manag-
ers at all levels in organizations are becoming increasingly aware that a critical source of competi-
tive advantage often comes not from having the most ingenious product design or service, the best
marketing strategy, state-of-the-art technology, or the most savvy financial management but from
having the appropriate systems for attracting, motivating, and managing the organizations’ human
resources (HR).
Adopting a strategic view of HR, in large part, involves considering employees as human
“assets” and developing appropriate policies and programs as investments in these assets to increase
their value to the organization and the marketplace. The characterization of employees as human
assets can have a chilling effect on those who find the term derogatory because of its connotation
that employees are to be considered “property.” However, the characterization of employees as assets
is fitting, considering what an asset actually is: something of value and worth. Effective organizations
realize that their employees do have value, much as the organization’s physical and capital assets have
value. Exhibit 1.1 illustrates some of the value employees bring to an organization.
EXHIBIT 1.1
Sources of Employee Value
Technical Knowledge
• Markets • Customers
• Processes • Environment
Ability to Learn and Grow

• Openness to new ideas
• Acquisition of knowledge/skills
Decision Making Capabilities

• Analytical skills
• Problem-solving skills
• Change-management and
implementation skills
Motivation
• Job satisfaction
• Challenging work
• Perceived “fit” with organization
Commitment
• Belief in mission • Engagement
Teamwork
• Interpersonal skills
• Leadership ability
Chapter 1 An Investment Perspective of Human Resource Management 5
Adopting an Investment Perspective

The characterization of employees as human assets has important implications for the strategic
management of HR in that it allows us to consider HR from an investment perspective. Physi-
cal and capital assets in organizations, such as plant, property, machinery, and technology, are
acquired and subsequently managed most effectively by treating them as investments; the organi-
zation determines the optimal mix of high-performance, high-return assets to its strategic objec-
tives. Analyses are made of the costs and benefits of certain expenditures, with judgments made
concerning the riskiness and potential returns of such expenditures. Viewing HR from an invest-
ment perspective, much as physical assets are viewed, rather than as variable costs of production,
allows an organization to determine how to best invest in its people. Furthermore, considering
the risk and return on possible expenditures related to acquiring or developing human assets
allows an organization to consider how current expenditures can be best allocated to meet long-
term performance goals.
In considering whether to undertake the expense of a new training program, for example, an
organization needs to consider not only the out-of-pocket costs for the training but also the related
opportunity costs, such as lost time on the job, and weigh these costs against the potential benefits of
the training, such as enhanced performance, potential increased loyalty, and motivation. The train-
ing also needs to be assessed relative to risk because the enhanced marketability of employees makes
them more desirable to competitors. Similarly, in considering compensation programs as an invest-
ment, an organization needs to consider what it is “investing” in when it pays someone (knowledge,
commitment, new ideas, retention of employees from competitors). The potential return on the
organization’s financial outlay in compensation will determine whether its compensation system is a
viable investment strategy.
Taking an investment perspective toward HR/assets is critical considering that other physical
assets, such as facilities, products and services, technologies, and markets, can be readily cloned or
imitated by competitors.1 Human assets cannot be duplicated and therefore become the competitive
advantage that an organization enjoys in its market(s). This is becoming increasingly important as
the skills required for most jobs become less manual and more cerebral and knowledge-based in
nature.2 Rapid and ongoing advances in technology have created a workplace where laborers are
being replaced by knowledge workers. An organization’s “technology” is becoming more invested in
people than in capital. Thought and decision-making processes as well as skills in analyzing complex
data are not “owned” by an organization but by individual employees. This is in stark contrast to
traditional manufacturing organizations where the employer usually owns or leases the machinery
and production processes, and duplication of the organization’s “capital” is restricted primarily by
cost considerations.
Managing Employees at United Parcel Service

Although taking a strategic approach to HR management usually involves looking at employees
as assets and considering them as investments, this does not always mean that an organization
will adopt a “human relations” approach to HR. A few successful organizations still utilize prin-
ciples of scientific management, where worker needs and interests are subordinate to efficiency.
United Parcel Service (UPS) is a prime example of this. At UPS, all jobs from truck loaders to
drivers to customer service representatives are designed around measures of efficiency. Wages
are relatively high, but performance expectations are also high. This approach toward manag-
ing people is still “strategic” in nature because the systems for managing people are designed
around the company’s strategic objectives of efficiency. Consequently, all employee training,
performance management, compensation, and work design systems are developed to promote
this strategic objective of efficiency.
Managing an organization’s employees as investments mandates the development of an appro-

priate and integrated approach to managing HR that is consistent with the organization’s strategy.
As an example, consider an organization whose primary strategic objective involves innovation. An
organization pursuing an innovation strategy cannot afford high levels of turnover within its ranks.
It needs to retain employees and transfer among employees the new knowledge being developed in-
house. It cannot afford to have its employees develop innovative products, services, and processes and
then take this knowledge to a competitor for implementation. The significant investment in research
and development ends up having no return. Because the outcome of this expenditure (research and
development) is knowledge that employees have developed, it is critical as part of the organization’s
overall strategy for the organization to devise strategies to retain its employees and their knowledge
bases until the “new knowledge” becomes “owned” by the organization itself (through diffusion
throughout the organization) rather than by the employee.
This leads to a dilemma involving investing in human assets. An organization that does not
invest in its employees may be less attractive to prospective employees and may have a more difficult
time retaining current employees; this causes inefficiency (downtime to recruit, hire, and train new
employees) and a weakening of the organization’s competitive position. However, an organization
that does invest in its people needs to ensure that these investments are not lost. Well-trained employ-
ees, for example, become more attractive in the marketplace, particularly to competitors who may be
able to pay the employee more because they have not had to invest in the training that the employee
has already received. Although an organization’s physical assets cannot “walk,” its human assets can,
making the latter a much more risky investment. An organization can certainly buy or sell its physi-
cal assets because it has “ownership” of them, but it does not own its human assets. Consequently,
organizations need to develop strategies to ensure that employees stay on long enough for the orga-
nization to realize an acceptable return on its investment relative to the employees’ acquired skills
and knowledge, particularly when the organization has subsidized the acquisition. This requires the
organization to determine the actual “value” of each employee. Valuation of human assets has impli-
cations for compensation, advancement opportunities, and retention strategies as well as how much
should be invested in each area for each employee.
Valuation of Assets
Five major kinds of assets or capital that organizations can leverage to aid in performance and
add value to operations are financial assets/capital, physical assets/capital, market assets/capital,
operational assets/capital, and human assets/capital, as shown in Exhibit 1.2. Financial assets/
capital include equity, securities and investments, and accounts receivable. Physical assets/capital
include plant, land, equipment, and raw materials. Market assets/capital include goodwill, brand-
ing, customer loyalty, distribution networks, product lines and patents, trademarks, and copyrights.
Operational assets/capital include management practices, the structure of work, and the use of tech-
nology. Human assets/capital include employee education levels, knowledge, skills, competencies,
work habits and motivation, and relationships with coworkers, customers, suppliers, regulators,
and lenders.
Financial and physical assets/capital are relatively easy to measure via accounting practices.
Most of these assets are tangible and have some clear market value. Market and operational assets/
capital are a bit more challenging to measure, but accounting practices have been developed that
can place a general subjective value on such assets. Human assets/capital, however, are very diffi-
cult to measure; attempts to do so are at the forefront of current research being conducted in HR
management.
A direct result of this difficulty in measuring human assets is that the valuation of current and
future human assets is often ignored from consideration when organizations are facing economic
and financial challenges. The media and financial markets usually respond favorably when decision
makers announce restructurings or right-sizing initiatives, which reduce the size of the organization’s
workforce, allowing it to reduce short-term costs. Such actions, however, involve the loss of human
assets, which have value to the organization, often without consideration of the long-term impact of
such losses on the organization’s ability to regain its position in the marketplace. Effective manage-
ment recognizes that the organization’s survival and renewal require the right size and mix of human
capital and balances short-term needs to reduce or restructure costs with a clear strategy for the
future. The key issue organizations face here is how to leverage the value of the organization’s human
assets for the good of the organization in the immediate, short, and long term.
EXHIBIT 1.2
Types of Organizational Assests/Capital
Ease of
measurement
Easier Examples
• Financial • equity
• securities and investments
• accounts receivable
• Physical • plant
• land
• equipment
• raw materials
• Market • goodwill
• branding
• customer loyalty
• product line
• distribution networks
• patents, trademarks, copyrights
• Operational • management practices

• structure of work
• technology
• Human • education
• knowledge
• skills
• competencies
• work habits and motivation
• personal relationships
More difficult
Understanding and Measuring Human Capital

Given that employees and their collective skills, knowledge, and abilities represent a signifi-
cant asset for organizations, a critical issue for organizations becomes measuring this value as
well as its contribution to the organization’s bottom line. One of the first studies that success-
fully demonstrated this relationship was conducted by Huselid in the mid-1990s. This study
identified what were called “high performance work systems” (HPWS) and demonstrated that
integrated, strategically focused HR practices were directly related to profitability and market
value.3 A recent study by Watson Wyatt Worldwide found that the primary reason for organiza-
tional profitability is the effective management of human capital. This involves, in part, provid-
ing employees with rewards that are commensurate with their contributions and ensuring that
investments in employees are not lost to competitors by actively managing employee retention.4
Another study found that effective, integrated management of human capital can result in up
to a 47 percent increase in market value.5 A landmark study conducted by Becker, Huselid, and
Ulrich that examined a variety of HR management quality indices found that the top 10 percent
of organizations studied enjoyed a 391 percent return on investment (ROI) in the management of
their human capital.6
Extending these findings, Dyer and Reeves attempted to define what can be called the HR
“value chain.”7 They argued that performance could be measured via four different sets of out-
comes: employee, operational, financial and accounting, and market-based. More importantly, they
proposed that these sets of outcomes had a sequential cause-and-effect relationship, as indicated in
Exhibit 1.3. Each outcome fueled success in a subsequent outcome, establishing a causal link between
HR practices and an organization’s market value.
Given this proven link between integrated and strategic HR practices and bottom-line per-
formance, HR practitioners have been faced with the task of developing appropriate HR met-
rics, which specifically illustrate the value of HR practices and activities, particularly relative
to accounting profits and market valuation of the organization. This task has proven to be far
more complex than anticipated, given the difficulties of measuring human assets/capital. One
study concluded that 90 percent of Fortune 500 organizations in the United States, Canada, and
Europe evaluate their HR operations on the basis of three rather limited metrics: employee reten-
tion and turnover, corporate morale and employee satisfaction, and HR expense as a percentage of
operational expenses.8 Such “staffing metrics” simply document the extent to which HR performs
traditional job functions without necessarily illustrating how HR impacts company profits and
shareholder value. Moreover, a focus on such staffing metrics involves a demonstration of how
employees can be treated as expenses rather than as assets that can be managed, invested in, and
leveraged for profit.
EXHIBIT 1.3
HR Value Chain
Employee Operational Financial/ Market-

Outcomes Outcomes Accounting based
Outcomes Outcomes
• attitudes • productivity
• behavior • quality • expenses • stock price
• commitment • customer • revenues • valuation/
• engagement satisfaction • profitability capitalization
and loyalty
Senior HR executives in these organizations stressed that they lacked accurate and meaningful
methods that measured performance, despite the fact that human assets/capital can account for as
much as 80 percent of the value of an organization.9 One reason is that most accounting valuation
methods stress the past and current value of assets. Much of the value of human assets/capital rests
with the value of an organization and its ability to proactively meet challenges that lie ahead, rela-
tive to responsiveness to changing economic, political, and market conditions. As a result, valuation
of human assets/capital and analysis of human capital investments can be value-laden, subjective,
expensive—and, hence, ignored.
Measuring Human Assets/Capital at Dow Chemical

Dow Chemical has been a leader in forging the frontiers of measuring human capital. Dow
has attempted to develop a reliable measure to help calculate each employee’s current and
anticipated future contribution to the financial goals of the business. A pilot project is cur-
rently being tested in a single business unit; it examines employee performance on proj-
ect assignments by using two specific metrics: expected human capital return (EHCR) and
actual human capital return (AHCR). EHCR involves a calculation of the break-even point
of investment in an employee, above salary and additional outlays, such as recruiting and
training expenses. AHCR involves a calculation of the “value created” by the employee based
on the projects he or she worked on. This metric considers the skills and knowledge of each
employee relative to the net present value of a specific project. The desired outcomes of these
measures are assisting managers with matching employee talents and project needs, identify-
ing employee development opportunities, and creating a more efficient and effective means
for project team staffing. Although the program is still in the pilot stage, with validation stud-
ies in progress, Dow anticipates rolling out the metrics to other business units in the very
near future.10
Given the complex nature of measuring human assets/capital and return on such investments,
where does an organization begin in assuming such an undertaking? One helpful model has been
developed by Mercer, which can allow those concerned with measuring HR performance and docu-
menting the value added by specific initiatives to demonstrate to senior management the value added
and bottom-line impact.11 This model involves six steps: (1) identify a specific business problem that
HR can impact; (2) calculate the actual cost of the problem to the organization; (3) choose a HR solu-
tion that addresses all or part of the problem; (4) calculate the cost of the solution; (5) 6 to 24 months
after implementation, calculate the value of the improvement for the organization; and (6) calculate
the specific ROI metric.
One caveat should be obvious from not only Mercer’s approach but also that currently being
employed at Dow Chemical. Unlike the returns on other types of assets/capital, the ROI in human
assets/capital are often not realized until some point in the future. Key decision makers need to be
patient in waiting for these results, and HR also needs to subsequently take interim measures and
provide status reports to senior management that illustrate preliminary beneficial results. HR needs
to move away from mere data collection, however, and perform more comprehensive analysis of per-
formance measures that relate to the critical metrics for which operating divisions are held account-
able. Toward this end, HR needs to partner with chief financial officers to understand the language of
investment and asset management. If HR continues to be seen as a cost center, it will be the primary
target during cost-cutting operations, given that labor is the primary cost incurred in the service-
and information-intensive sectors, which are fueling the growth in our economy. One study places
the relative expenses for human capital as high as 70 percent of overall expenditures.12 Hence, the
challenge for HR is to provide senior management with value-added human capital investments
backed by solid and meaningful financial metrics.
Moneyball and the Oakland Athletics

The 2003 best-selling book, Moneyball, later made into a motion picture in 2011, chronicled the
real-life application of HR metrics in major league baseball and their impact on performance.
Starting with his appointment in 1998 as Oakland Athletics general manager, Billy Beane was
forced to rethink how he selected players given the fact that his small-market team could not
compete financially with big-market teams, such as those in New York and Boston, which con-
sistently ended up signing the biggest name free-agent players at hefty salaries. Beane looked
beyond traditional statistical measures of player “value” (such as batting average and home runs
for position players and games won, earned run average and strikeouts for pitchers) to seek out
players who were generally undervalued. Beane and his statistician instead considered alterna-
tive metrics, such as on-base percentage and average number of pitches required to complete
an at-bat, and discovered that such metrics had a higher correlation with games won by a team.
Applying these new metrics as part of an ongoing staffing plan, Beane’s cash-poor team quali-
fied for the post-season from 2000 to 2003 with an average of 98 victories per season despite
having one of the lowest payrolls in baseball. Soon, other teams were copying Beane’s approach
and the Athletics lost their competitive advantage. Beane’s approach illustrates that the use of
staffing metrics can translate into significant success for an organization. The key is selecting the
appropriate metrics and analytical techniques, which may be different from those currently in
use by the organization or standard within the industry.
HR Metrics and Analytics

Many CEOs openly acknowledge the importance of effective and strategic HR management in their
organization’s success. Jack Welch noted in one of his last General Electric annual reports: “Develop-
ing and motivating people is the most important part of my job. I spent one-third of my time on
people. We invest $1 billion annually in training to make them better. I spend most of my time on
the top 600 leaders in the company. This is how you create a culture.”13. One recent study of Fortune
100 annual reports found that 14 percent of such reports contained at least one quantitative measure
of HR management, such as turnover rate, investment in training, percentage of pay that is variable,
or results from an employee attitude survey.14 Despite this, Wall Street analysts still generally fail to
acknowledge human capital in their assessment of the potential worth of a company’s stock or the
effects that human capital measures can have on a company’s stock price.
Perhaps one reason for this lack of reporting of and respect for metrics related to human capital
rests with the fact that there are no universally accepted metrics for the valuation of human cap-
ital or a standard format for measuring and reporting such data. Indeed, the Society for Human
Resource Management has identified a number of common metrics for measuring the performance
and value of human capital, a number of which are presented in Exhibit 1.4. These are measures that
can easily be translated into bottom-line measures of performance as well as compared to industry
benchmarks. Exhibit 1.5 provides examples of how five of these metrics that are often regarded as the
most prominent measures of human capital management can be calculated and utilized. Nonethe-
less, stock analysts are more concerned with talking with operations, accounting, and finance heads
rather than those in HR, as analysts usually have their training in, understand, and are most familiar
and comfortable with these areas.
There are no “perfect” metrics, however, the appropriate human capital metrics would depend
on the organization or business unit’s strategy. Organizations concerned about minimizing costs
might be most concerned with metrics related to turnover and revenue per employee. Organizations
pursuing a strategy of aggressive growth might rely on metrics such as time to fill, while those con-
cerned with innovation might closely monitor training costs per employee. Divisions or subsidiaries
within the same organization might use totally different metrics, dependent on their unit’s goals
and strategies.
Another random document with
no related content on Scribd:
femme, abandonne Olympie. — Roger reçoit
l’hippogriffe des mains de Logistilla qui lui apprend à le
conduire. Il descend avec lui en Angleterre, où il voit le
rassemblement des troupes destinées à porter secours
à Charles. En passant en Irlande, il aperçoit dans l’île
d’Ébude Angélique enchaînée à un rocher pour être
dévorée par l’orque. Il abat le monstre, prend la jeune
fille en croupe, et descend avec elle sur le rivage de la
Basse-Bretagne.
Chant XI. — Angélique échappe à Roger au moyen de
l’anneau enchanté, et se réfugie dans la demeure d’un
pasteur. Roger, allant à sa recherche, voit un géant
enlever une dame qui lui paraît être Bradamante. —
Olympie, abandonnée par Birène et prise par des
corsaires, est exposée dans l’île d’Ébude à la voracité
du monstre marin. Roland la délivre. Survient Obert,
roi d’Irlande, qui devient amoureux d’Olympie et la
prend pour femme, après avoir enlevé à Birène ses
États et la vie. 219
Chant XII. — Roland, toujours à la recherche
d’Angélique, voit une femme qui lui ressemble dans les
bras d’Atlante, lequel, changé en chevalier, paraît
l’emporter. En le poursuivant, Roland parvient à un
palais enchanté, où arrive également Roger qui court
après celui qu’il prend pour le ravisseur de
Bradamante. Angélique y arrive, elle aussi, et y trouve
Roland, Sacripant, Ferragus, Gradasse et d’autres
guerriers. Une querelle s’élève à son sujet entre
quelques-uns d’entre eux, ce qui procure à Ferragus
l’occasion de s’emparer du casque de Roland.
Angélique se dirige vers le Levant, et trouve dans un
bois un jeune homme mortellement blessé. — Roland
va vers Paris et détruit deux troupes de Maures. Plus
loin il découvre un repaire de malandrins qui retiennent
Isabelle prisonnière. 240
Chant XIII. — Isabelle raconte à Roland ses malheurs. 264
Surviennent les malandrins habitants de la caverne.
Roland les tue tous, puis il part emmenant Isabelle. —
Bradamante apprend de Mélisse que Roger est tombé
au pouvoir du vieux magicien. Elle va pour le délivrer
et reste prise dans son propre enchantement. —
Digression élogieuse de Mélisse sur les femmes
appartenant à la maison d’Este.
Chant XIV. — L’armée des païens s’étant rassemblée, on
constate l’absence des deux troupes détruites par
Roland. Mandricard, courant sur les traces du paladin,
rencontre Doralice, fille du roi de Grenade, qui s’en va
épouser Rodomont, roi de Sarze. Il tue le cortège,
emmène Doralice avec lui et en fait sa femme. Les
Maures donnent l’assaut à Paris. 284
Notes 319
FIN DE LA TABLE DU TOME PREMIER.

IMPRIMÉ PAR A. QUANTIN
ancienne maison J. Claye
POUR
ALPHONSE LEMERRE, ÉDITEUR
PARIS
PETITE BIBLIOTHÈQUE LITTÉRAIRE
(AUTEURS ANCIENS)
Volumes petit in-12 (format des Elzévirs, imprimés sur papier de

Hollande).
Chaque volume 5 fr.
Chaque ouvrage est orné d’un portrait-frontispice gravé à l’eau-forte.
La Fontaine. Fables, avec une notice et des notes par A. Pauly. 2

volumes (épuisés).
La Fontaine. Contes, avec des notes par A. Pauly. 2 volumes
(épuisés).
Régnier. Œuvres complètes, publiées par E. Courbet. 1 vol.
(épuisé).
La Rochefoucauld, textes de 1665 et de 1678, publiés par Ch.
Royer. 1 volume (épuisé).
Manon Lescaut. 1 volume (épuisé).
6 Eaux-fortes d’après Gravelot et Pasquier, pour
illustrer Manon Lescaut 12 fr.
Beaumarchais. Théâtre. (Le Barbier de Séville). 1 vol. (épuisé).
(Le Mariage de Figaro). 1 vol. (épuisé).
Daphnis et Chloé, avec notice par E. Charavay. 1 volume
(épuisé).
7 Eaux-fortes d’après les dessins de Prud’hom pour
illustrer Daphnis et Chloé, gravées par Boilvin. 10 fr.
Œuvres complètes de Molière, avec notice et notes
par A. Pauly. 8 vol. Chaque volume. 5 fr.
35 Eaux-fortes d’après Boucher, pour illustrer les
Œuvres de Molière. 40 fr.
Bernardin de Saint-Pierre. Paul et Virginie, avec une 5 fr.
préface et des notes par Anatole France. 1
volume.
7 Eaux-fortes pour illustrer Paul et Virginie,
dessinées et gravées par Ed. Hédouin. 15 fr.
Boileau. Œuvres avec notice et notes par M. A. Pauly.
2 volumes. 10 fr.
7 Eaux-fortes d’après Cochin gravées par Monziès,
pour illustrer les Œuvres de Boileau 10 fr.
PARIS. — Impr. J. CLAYE. — A. Quantin et Cie, rue St-Benoît.
NOTES DU TRANSCRIPTEUR
Les notes numérotées de [1] à [15] sont les notes de
bas de page de la préface. On a numéroté de [16] à [67]
les notes en fin de volume, qui ne présentent dans l’original
ni numérotation ni renvoi depuis le corps du texte.
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READING 6.1: Sexual Harassment Versus Workplace Romance: Social Media Spillover

7 Employment Law 221

International Assignments 287

9 Training and Development 303

10 Performance Management and Feedback 327

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FIN DE LA TABLE DU TOME PREMIER.

Volumes petit in-12 (format des Elzévirs, imprimés sur papier de

Chaque volume 5 fr.

Chaque ouvrage est orné d’un portrait-frontispice gravé à l’eau-forte.

La Fontaine. Fables, avec une notice et des notes par A. Pauly. 2

PARIS. — Impr. J. CLAYE. — A. Quantin et Cie, rue St-Benoît.

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READING 6.1: Sexual Harassment Versus Workplace Romance: Social Media Spillover