Introduction to HR Challenges
Introduction to HR Challenges
What you’ll learn to do: discuss the challenges facing today’s HR managers
In this final section, we will consider the trends impacting Human Resource professionals. Given HR’s fundamental human capital management responsibility, we start the section with one of the most critical issues: retaining talent. Specifically, we will explore why employees leave and what can be done to minimize turnover. Finally, we will highlight the challenges and opportunities facing HR managers, including issues identified by Society of Human Resource Management’s panel of experts.
1. Reducing Turnover
LEARNING OUTCOMES
- Summarize the common causes of employee turnover
- Describe HR strategies for reducing employee turnover
The following is a list of the top reasons why people change jobs:
- The downsizing or the restructuring of an organization (54 percent)
- New challenges or opportunities that arise (30 percent)
- Poor or ineffective leadership (25 percent)
- Having a poor relationship with a manager (22 percent)
- For better work-life balance (21 percent)
- Contributions are not being recognized (21 percent)
- For better compensation and benefits (18 percent)
- For better alignment with personal and organizational values (17 percent)
- Personal strengths and capabilities are not a good fit with an organization (16 percent)
- The financial instability of an organization (13 percent)
- An organization relocated (12 percent)
In a human resources context, turnover is the rate at which employees leave an organization. Simple ways to describe it are “how long employees tend to stay” or “the rate of traffic through the revolving door.” Staff turnover can be optimal when a poorly performing employee decides to leave an organization or dysfunctional when the high turnover rate increases the costs associated with recruiting and training new employees or if good employees consistently decide to leave.
Turnover is measured for individual companies and for industries as a whole. If an employer is said to have high turnover relative to its competitors, it means that employees of that company have a shorter average tenure than those of other companies in the same industry. High turnover may be harmful to a company’s productivity if skilled workers are often leaving and the worker population contains a high percentage of novice workers.
Preventing the turnover of employees is important in any business. Without them, the business would be unsuccessful. However, according to the Bureau of Labor Statistics, more employers today are finding that employees remain for approximately 23 to 24 months. The Employment Policy Foundation reports that it costs a company an average of $15,000 per employee turnover, which includes separation costs such as paperwork and unemployment; vacancy costs, including overtime or temporary employees; and replacement costs including advertisement, interview time, relocation, training, and decreased productivity when colleagues depart.
Research on employee job turnover has attempted to understand the causes of individual decisions to leave an organization. It has been found that lower performance, lack of reward contingencies for performance, and better external job opportunities are the main causes. Other variables related to turnover are the conditions in the external job market, the availability of other job opportunities, and the length of employee tenure.
Providing a stimulating workplace environment, which fosters happy, motivated, and empowered individuals, lowers employee turnover and absentee rates. Creating a work environment that supports personal and professional growth promotes harmony and encouragement on all levels, so the effects are felt companywide.
Continual training and reinforcement also help to develop a workforce that is competent, consistent, competitive, effective, and efficient. Beginning on the first day of work, providing individuals with the necessary skills to perform their job is important. Before the first day, it is important for the interview and hiring process to expose new hires to the mission and culture of the company, so individuals know whether the job is a good fit and their best choice.
Networking and strategizing within the company provide ongoing performance management and help build relationships among coworkers. It is also important to motivate employees to focus on customer success, profitable growth, and the company well-being. Employers can keep their employees informed and involved by including them in future plans, new purchases, and policy changes, and by introducing new employees to the employees who have gone above and beyond in meetings. Engagement with employees—by sharing information with them or giving out recognition rewards—makes them feel included and shows them that they are valuable.
In addition, when organizations pay above-market wages, the worker’s motivation to leave and look for a job elsewhere is be reduced. This strategy makes sense because it is often expensive to train replacement workers.
When companies hire the best people, newly hired talent and veterans are positioned to reach company goals, maximizing the investment of each employee. Taking the time to listen to employees and help them feel involved will create loyalty, which, in turn, can have a big impact on employee turnover.
2. HR Challenges
LEARNING OUTCOMES
- Summarize the challenges facing today’s HR managers
Ultimately, the role of an HR manager is maintaining the level of human capital needed by the business to meet its organizational goals. In working to meet the demands for a high-quality and dedicated workforce, HR managers must cope with challenges and trends that often lie beyond their control. How they react to and address these challenges can have a big effect on the success of the organization. The following is a summary of the major challenges facing human resource managers today.
Increased Competition for Qualified Workers
As economies continue to expand, the demand for labor is increasing and companies are drawing from the same pool of skilled workers. Employees who possess skills sets that are in short supply find that they can have their pick of employers, and HR managers need to be ready to respond with benefits beyond salary, such as flexible working hours, employee-oriented working conditions, and long-term job security. The degree to which an organization is reputed to be a “great place to work” can affect the success of recruitment and retention efforts, as prospective employees now often rate employers on criteria such as CSR, intellectual-property policies, and environmental issues.
Changing Worker Demographics
With the aging of the baby-boom generation, older workers are expected to make up a much larger share of both the population and the labor force than in the past. The aging of the overall population has a significant impact on the labor pool and its growth. Populations age as a result of increases in life expectancy and/or a decrease in their fertility rates. According to the U.S. Census Bureau, the ratio of people 65 years and older to those between 20 and 64 years could double between now and the middle of the century. In addition, the ethnic and gender composition of the workforce is changing. Historical data and projections from the BLS shown in the table below highlight some of the trends in the demographics of the U.S. workforce.
| Group | 1992 | 2002 | 2012 | 2022 |
|---|---|---|---|---|
| Total | 37.1 | 39.8 | 41.9 | 42.6 |
| Men | 37.2 | 39.8 | 41.8 | 42.2 |
| Women | 37.0 | 40.0 | 42.1 | 43.1 |
| White | 37.3 | 40.2 | 42.6 | 43.3 |
| Black | 35.5 | 38.1 | 39.7 | 40.3 |
| Asian | 36.2 | 38.8 | 40.9 | 42.9 |
| Hispanic origin | 32.5 | 34.0 | 36.9 | 38.9 |
| White non-Hispanic | 37.8 | 41.1 | 44.2 | 44.8 |
| Source: U.S. Bureau of Labor Statistics. | ||||
Increased Globalization of Economies
As countries enter into more and more global trade agreements such as the Trans Pacific Partnership (TPP), companies are finding it easier to go offshore and/or outsource key functions within the organization. When processes go offshore, an entire division of a company may be relocated to another country, eliminating jobs in the U.S. permanently. For example, Hewlett Packard laid off five hundred employees working in customer service and technical support in Conway, Arkansas, when it moved the division to India. Many colleges now outsource their bookstore services to companies such as Barnes & Noble, thus eliminating the positions associated with managing and running the college bookstore. In such cases, it often falls to the HR manager to lay off the personnel in the departments whose responsibilities have been outsourced.
Workplace Violence
While more and more information on the causes of workplace violence and ways of handling it is available, there is often no reasonable explanation for its occurrence, and, despite everything we know or do, violent situations happen. No employer is immune from workplace violence, and no employer can totally prevent it. Today’s HR managers are tasked with informing employees about workplace violence policies and programs, investigating all acts of violence, threat, and similar disruptive behavior, and encouraging employees who show signs of stress or possible violence to seek counseling or help through employee assistance programs.
Employee Turnover
In a human resources context, turnover is the rate at which employees leave an organization. Simple ways to describe it are “how long employees tend to stay” or “the rate of traffic through the revolving door.” Staff turnover can be beneficial when a poorly performing employee decides to leave an organization or detrimental when the high turnover rate increases the costs associated with recruiting and training new employees or if good employees consistently decide to leave. High turnover can be harmful to a company’s productivity if skilled workers are steadily leaving and the worker population contains a high percentage of novice workers. HR managers must constantly be on the lookout for ways of reducing employee turnover. As you’ll recall, it costs a company, on average, $15,000 when it loses an employee.
Data-Driven HR Practices
The increasing availability and importance of data represents both a challenge and opportunity for HR management. As is true in other functional areas, HR professionals are being held accountable for performance metrics and are expected to use “big data” effectively to improve decision making and prove the return on HR-related investments.[1]
These are just a few of the emerging topics and trends that today’s HR managers must handle, while still recruiting, hiring, and maintaining the organizations’ existing workforce. As the world becomes increasingly complex, so do the roles and responsibilities of today’s human resource professionals.
- Schramm, Jen. "The Big Issues Facing HR." SHRM. March 1, 2016. Accessed June 25, 2019. https://www.shrm.org/hr-today/news/hr-magazine/0316/pages/the-big-issues-facing-hr.aspx. ↵
3. Managing Grievances and Conflicts
How are grievances between management and labor resolved, and what tactics are used to force a contract settlement?
In a unionized work environment, employees follow a step-by-step process for handling grievances or disputes between management and labor. Conflicts over contracts, however, are far more challenging to resolve and may result in the union or employer imposing economic pressure, as described in this section.
Grievance Handling and Arbitration
The union’s main way of policing the contract is the grievance procedure. A grievance is a formal complaint by an employee or the union that management has violated some part of the contract. Under a typical contract, the employee starts by presenting the grievance to the supervisor, either in person or in writing. The typical grievance procedure is illustrated in Exhibit 8.13. An example grievance is a situation in which an employee is disciplined with a one-day suspension (and loss of pay) for being late for work several times in one month.
If the problem isn’t solved, the grievance is put in writing. The employee, one or more union officials, the supervisor, and perhaps the plant manager then discuss the grievance. If the matter still can’t be resolved, another meeting takes place with higher-level representatives of both parties present. If top management and the local union president can’t resolve the grievance, it goes to arbitration.
Arbitration is the process of settling a labor-management dispute by having a third party—a single arbitrator or a panel—make a decision. The decision is final and binding on the union and employer. The arbitrator reviews the grievance at a hearing and then makes the decision, which is presented in a document called the award. In the one-day suspension mentioned above, the arbitrator might rule that the discipline was improperly made because the employee’s attendance record for the month was not accurately maintained by the firm.
Tactics for Pressuring a Contract Settlement
Virtually all labor agreements specify peaceful resolution of conflicts, usually through arbitration. However, when a contract expires and a new agreement has not been reached, the union is free to strike or engage in other efforts to exert economic pressure on the employer. A strike occurs when employees refuse to work. The United Auto Workers union used a selective strike strategy, a strategy of conducting a strike at a critical plant that supplies parts to other plants, against General Motors. The union conducted its strike at a stamping and parts facility in Flint, Michigan, that supplied critical parts to other plants. The 54-day strike caused the company to stop production at many of its assembly plants because parts were not available from the Flint plant. General Motorslost approximately $2.2 billion during that dispute. Likewise, the employer can put pressure on the union through a lockout or by hiring strike replacements if the union has called a strike. For example, in 2018 aluminum producer Alcoa locked out more than 1,000 union workers from its smelter facility in Quebec, Canada, after union members went on strike.16 Table 8.5 provides a summary of union and employer pressure strategies for forcing a contract settlement.
| Strategies of Unions and Employers | |||
|---|---|---|---|
| Union Strategies | Employer Strategies | ||
| Strike: | Employees refuse to work. | Lockout: | Employer refuses to let employees enter plant to work. |
| Boycott: | Employees try to keep customers and others from doing business with employer. | Strike replacements: | Employer uses nonunion employees to do jobs of striking union employees. |
| Picketing: | Employees march near entrance of firm to publicize their view of dispute and discourage customers. | Mutual-aid pact: | Employer receives money from other companies in industry to cover some of income lost because of strikes. |
| Corporate campaign: | Union disrupts stockholder meetings or buys company stock to have more influence over management. | Shift production: | Employer moves production to nonunion plant or out of country. |
4. Legal Environment of Human Resources and Labor Relations
What are the key laws and federal agencies affecting human resource management and labor relations?
Federal laws help ensure that job applicants and employees are treated fairly and not discriminated against. Hiring, training, and job placement must be unbiased. Promotion and compensation decisions must be based on performance. These laws help all Americans who have talent, training, and the desire to get ahead. The key laws that currently impact human resource management and labor relations are listed in Table 8.6.
Several laws govern wages, pensions, and unemployment compensation. For instance, the Fair Labor Standards Act sets the federal minimum wage, which is periodically raised by Congress. Many minimum-wage jobs are found in service firms, such as fast-food chains and retail stores. The Pension Reform Act protects the retirement income of employees and retirees. Federal tax laws also affect compensation, including employee profit-sharing and stock purchase plans. When John F. Kennedy signed the Equal Pay Act into law in 1963, the goal was to stop the practice of paying women lower wages for the same job based on their gender. At the time, women with full-time jobs earned between 59 and 64 cents for every dollar their male counterparts earned in the same jobs. Although this law has been in place for several decades, progress has been slow. On April 17, 2012, President Barack Obama proclaimed National Equal Pay Day, noting that women who work full time earn only 77 cents for every dollar their male counterparts make. In 2016, the wage gap changed slightly, with women making 80.5 percent of what men earn.17
| Laws Impacting Human Resource Management | ||
|---|---|---|
| Law | Purpose | Agency of Enforcement |
| Social Security Act (1935) | Provides for retirement income and old-age health care | Social Security Administration |
| Wagner Act (1935) | Gives workers the right to unionize and prohibits employer unfair labor practices | National Labor Relations Board |
| Fair Labor Standards Act (1938) | Sets minimum wage, restricts child labor, sets overtime pay | Wage and Hour Division, Department of Labor |
| Taft-Hartley Act (1947) | Obligates the union to bargain in good faith and prohibits union unfair labor practices | Federal Mediation and Conciliation Service |
| Equal Pay Act (1963) | Eliminates pay differentials based on gender | Equal Employment Opportunity Commission |
| Civil Rights Act (1964), Title VII | Prohibits employment discrimination based on race, color, religion, gender, or national origin | Equal Employment Opportunity Commission |
| Age Discrimination Act (1967) | Prohibits age discrimination against those over 40 years of age | Equal Employment Opportunity Commission |
| Occupational Safety and Health Act (1970) | Protects worker health and safety, provides for hazard-free workplace | Occupational Safety and Health Administration |
| Vietnam Veterans’ Readjustment Act (1974) | Requires affirmative employment of Vietnam War veterans | Veterans Employment Service, Department of Labor |
| Employee Retirement Income Security Act (1974)—also called Pension Reform Act | Establishes minimum requirements for private pension plans | Internal Revenue Service, Department of Labor, and Pension Benefit Guaranty Corporation |
| Pregnancy Discrimination Act (1978) | Treats pregnancy as a disability, prevents employment discrimination based on pregnancy | Equal Employment Opportunity Commission |
| Immigration Reform and Control Act (1986) | Verifies employment eligibility, prevents employment of illegal aliens | Employment Verification Systems, Immigration and Naturalization Service |
| Americans with Disabilities Act (1990) | Prohibits employment discrimination based on mental or physical disabilities | Department of Labor |
| Family and Medical Leave Act (1993) | Requires employers to provide unpaid leave for childbirth, adoption, or illness | Equal Employment Opportunity Commission |
Employers must also be aware of changes to laws concerning employee safety, health, and privacy. The Occupational Safety and Health Act (OSH Act) requires employers to provide a workplace free of health and safety hazards. For instance, manufacturers must require their employees working on loading docks to wear steel-toed shoes so their feet won’t be injured if materials are dropped. Drug and AIDS testing are also governed by federal laws.
Another employee law that continues to affect the workplace is the Americans with Disabilities Act. To be considered disabled, a person must have a physical or mental impairment that greatly limits one or more major life activities. More than 40 million Americans, 12.6 percent of the population, were disabled in 2015, according to the U.S. Census Bureau.18 Employers may not discriminate against disabled persons. They must make “reasonable accommodations” so that qualified employees can perform the job, unless doing so would cause “undue hardship” for the business. Altering work schedules, modifying equipment so a wheelchair-bound person can use it, and making buildings accessible by ramps and elevators are considered reasonable. Two companies often praised for their efforts to hire the disabled are McDonald’s and DuPont.
The Family and Medical Leave Act went into effect in 1993. The law guarantees continuation of paid health benefits, plus a return to the same or equivalent job, and applies to employers with 50 or more employees. It requires these employers to provide unpaid leave of up to 12 weeks during any 12-month period to workers who have been employed for at least a year and worked at least 1,250 hours during the past year. The reasons for the leave include the birth or adoption of a child; the serious illness of a child, spouse, or parent; or a serious illness that prevents the worker from doing the job.
According to the Bureau of Labor Statistics, only 11 percent of all private industry workers have access to paid family leave. Low-wage earners fare even worse. Only 5 percent of low-wage earners get any paid maternity leave, and nearly half will not take time off because they cannot afford to go without income. The United States continues to be one of only four countries in the world (along with Liberia, Suriname, and Papua New Guinea) that do not guarantee paid parental leave.19
The Wagner and Taft-Hartley Acts govern the relationship between an employer and union. Employees have the right to unionize and bargain collectively with the company. The employer must deal with the union fairly, bargain in good faith, and not discriminate against an employee who belongs to the union. The union must also represent all employees covered by a labor agreement fairly and deal with the employer in good faith.
Several federal agencies oversee employment, safety, compensation, and related areas. The Occupational Safety and Health Administration (OSHA) sets workplace safety and health standards, provides safety training, and inspects places of work (assembly plants, construction sites, and warehouse facilities, for example) to determine employer compliance with safety regulations.
The Wage and Hour division of the Department of Labor enforces the federal minimum-wage law and overtime provisions of the Fair Labor Standards Act. Employers covered by this law must pay certain employees a premium rate of pay (or time and one-half) for all hours worked beyond 40 in one week.
The Equal Employment Opportunity Commission (EEOC) was created by the 1964 Civil Rights Act. It is one of the most influential agencies responsible for enforcing employment laws. The EEOC has three basic functions: processing discrimination complaints, issuing written regulations, and gathering and disseminating information. An employment discrimination complaint can be filed by an individual or a group of employees who work for a company. The group may comprise a protected class, such as women, African Americans, or Hispanic Americans. The protected group may pursue a class-action complaint that may eventually become a lawsuit. As a measure to prevent employment discrimination, many employers set up affirmative action programs to expand job opportunities for women and minorities
Even with affirmative action and other company efforts to follow the law, each year the EEOC receives tens of thousands of complaints from current or former employees. The monetary benefits that the EEOC wins for employees has grown substantially during the past 10 years. Large monetary settlements often occur when the EEOC files a class-action suit against an employer. For example, the Ford Motor Company settled sexual and racial harassment claims by more than 30 women for more than $10 million at two Chicago-area manufacturing plants in 2017.20 Also, Sears, Motorola, and AT&T have had to make large back-pay awards and to offer special training to minority employees after the court found they had been discriminated against.
The NLRB was established to enforce the Wagner Act. Its five members are appointed by the president; the agency’s main office is in Washington, DC, and regional and field offices are scattered throughout the United States. NLRB field agents investigate charges of employer and union wrongdoing (or unfair labor practices) and supervise elections held to decide union representation. Judges conduct hearings to determine whether employers and unions have violated the law.
The Federal Mediation and Conciliation Service helps unions and employers negotiate labor agreements. Agency specialists, who serve as impartial third parties between the union and company, use two processes: conciliation and mediation, both of which require expert communication and persuasion. In conciliation, the specialist assists management and the union with focusing on the issues in dispute and acts as a go-between, or communication channel through which the union and employer send messages to and share information with each other. The specialist takes a stronger role in mediation by suggesting compromises to the disputing organizations.
- Introduction to HR Challenges. Authored by: Nina Burokas. Provided by: Lumen Learning. License: CC BY: Attribution
- Revision and adaptation. Authored by: Linda Williams and Lumen Learning. License: CC BY-SA: Attribution-ShareAlike
- Practice Questions. Authored by: Nina Burokas. Provided by: Lumen Learning. License: CC BY: Attribution
- HR Challenges. Authored by: Linda Williams and Lumen Learning. License: CC BY: Attribution
- Labor force projections to 2022. Provided by: Bureau of Labor Statistics. Located at: https://www.bls.gov/opub/mlr/2013/article/labor-force-projections-to-2022-the-labor-force-participation-rate-continues-to-fall.htm. License: Public Domain: No Known Copyright