MCE 350

(ENGINEERING ENTREPRENEURSHIP)
LECTURE 7
BY
ISMAILA S. O.

1
 Human Resource Management
• What Is Human Resource Management (HRM)?
• The policies and practices involved in carrying out the “people” or human resource
aspects of a management position, including recruiting, screening, training,
rewarding, and appraising.
• Human Resource Management includes all activities used to attract & retain
employees and to ensure they perform at a high level in meeting organizational
goals.
• These activities are made up of
• 1. Recruitment & selection.
• 2. Training and development.
• 3. Performance appraisal and feedback.
• 4. Pay and benefits.
• 5. Labor relations. 2
 Human Resource Planning
• HR Planning includes all activities managers do to forecast current
and future HR needs.
• Must be done prior to recruitment and selection
• Demand forecasts made by managers estimate the number &
qualifications the firm will need.
• Supply forecasts estimate the availability and qualifications of
current workers and those in the labor market.

3
 HRM Components
• Component should be consistent with the others, organization
structure, and strategy.
• Recruitment: develop a pool of qualified applicants.
• Selection: determine relative qualifications & potential for a job.
• Training & Development: ongoing process to develop worker’s
abilities and skills.
• Performance appraisal & feedback: provides information about
how to train, motivate, and reward workers.
• Managers can evaluate and then give feedback to enhance worker
performance.
4
 HRM Components
• Pay and Benefits: high performing employees should be
rewarded with raises, bonuses.
• Increased pay provides additional incentive.
• Benefits, such as health insurance, reward membership in firm.
• Labor relations: managers need an effective relationship with
labor unions that represent workers.
• Unions help establish pay, and working conditions.
• If management moves to a decentralized structure, HRM should
be adjusted as well.
5
 Recruitment
• External recruiting: managers look outside the firm for people who
have not worked at the firm before.
– Managers advertise in newspapers, hold open houses, recruit at universities,
and on the Internet.
– External recruitment is difficult since many new jobs have specific skill needs.
– A multi-prong approach to external recruiting works best.
• Internal Recruiting: positions filled within the firm.
– Internal recruiting has several benefits:
– Workers know the firm’s culture, may not have new ideas.
– Managers likely already know the candidates.
– Internal advancement can motivate employees.
6
 HRM Planning: Outsourcing
• Outsourcing: managers can decide to contract with outside
workers rather than hiring them.
• Outsourcing is more flexible for the firm.
• Outsourcing often provides human capital at a lower cost.
• Outsource problems: managers lose control over output.
• Outsource contractors are not committed to the firm.
• Unions typically are against outsourcing that has potential
to eliminate member’s jobs.
7
 Selection Tools
Background
Background
Information
Information
Interviews
Interviews References
References

Selection
Selection

Performance
Performancetests
tests Paper
Papertests
tests
Physical
Physical
Ability
Abilitytests
tests

8
 Selection Process
• After a pool of applicants are identified, qualifications related
to the job requirements are determined:
• Background Information: includes education, prior employment,
college major, etc.
• Interview: almost all firms use one of two types:
• Structured interview: managers ask each person the same job-related
questions.
• Unstructured interview: held like a normal conversation.
• Usually structured interviews preferred; bias is possible.
• Physical Ability Test: measure strength & endurance.
• Good for physically demanding jobs.

9
 Selection Process
• Paper & Pencil Tests: Either an ability and personality test.
• Ability test: assess if applicant has right skills for the job.
• Personality test: seek traits relevant to job performance.
• Be sure test is a good predictor of job performance.
• Performance Tests: measure job performance.
• Typing speed test is one example.
• Assessment Center: candidates assessed on job-related activities over
a period of a few days.
• References: outside people provide candid information
about candidate.
• Can be hard to get accurate information.
10
 Reliability & Validity
• Selection tools must be reliable and valid.
• Reliability: the degree to which the tool measures the same thing each time it
is used.
• Scores should be close for the same person taking the same test over time.
• Validity: Does the test measure what it is supposed to measure?
• Example: does a physical ability test really predict the job performance of a
firefighter?
• Managers have an ethical and legal duty to develop good selection
tools.

11
 Training & Development
• Training: teach organizational members how to perform
current jobs.
• Help worker’s acquire skills to perform effectively.
• Development: build worker’s skills to enable them to take
on new duties.
• Training used more often at lower levels of firm,
development is common with managers.
• A Needs Assessment should be taken first to determine
who needs which program and what topics should be
stressed.
12
 Types of Development
• Varied Work Experiences: Top managers must build expertise
in many areas.
• Workers identified as possible top managers given many
different tasks.
• Formal Education: tuition reimbursement is common for
managers taking classes for MBA or similar.
• Long-distance learning can also be used to reduce travel.
• Whatever training and development efforts used, results must
be transferred to the workplace.

13
 Job Analysis
• Job Analysis-the act of examining positions within an
organization
• Job Description-narrative explaining the scope of a
position
• Job Characteristics-tasks involved in a position
• Job Requirements-personal characteristics necessary to fill
a position

14
 Performance Appraisal
• Process of evaluating employee performance
– job related strengths
– development needs
– progress toward goals
– determine ways to improve performance
– Pay an promotion decisions
• More systematic is better, for the most part
• Self Appraisal
• Peer Appraisal
• 360 Degree appraisal
• Central Tendency Error-everyone ranked as average
• Leniency-individuals are ranked higher than they deserve
15
Who Appraises Performance?
Supervisors
Supervisors

Peers
Peers Customers
Customers& &
Clients
Clients
Sources
Sourcesof
of
performance
performance
appraisals
appraisals

Self
Self Subordinates
Subordinates

16
 Pay and Benefits
• Pay level: how the firm’s pay incentives compare to other
firms in the industry.
• Managers can decide to offer low or high relative wages.
• Pay Structure: clusters jobs into categories based on importance,
skills, and other issues.
• Benefits: Some are required (social security, workers
comp).
• Others (health insurance, day care, and others) are provided at
the employers option.
• Cafeteria-style plan: employee can choose the best mix of
benefits for them. Can be hard to manage.
17
 Pay
• Base Wage
• Job Based Pay-paid for the job that is done
• Competency Based Pay-pay is linked to job-relevant skills,
knowledge, and experience
• Incentive Pay-linked to job performance
• can increase motivation
• links employees to firm performance
• works well when employees trust firm

18
 Individual Incentives
• Piece-Rate - Pay for each unit of output
• Commissions - Pay from percentage of sales or profits
• Bonuses - Lump sum payments
• Merit Pay - Permanent increases in base pay linked to
individual’s previous performance
• Seniority - Increases over time

19
 Team or Organizational Incentive
• Gain Sharing - teams of employees share in gains from
improvements in productivity or cost saving measures
• Profit Sharing - A percentage of profits earned by a
department or company
• Stock Ownership
• Options
• Employee Stock Ownership Plans

20
 How Small Business Human Resource
Management Is Different

Entrepreneur’
Size of Priority of Informality of
s effect on
HR staff HR issues HR practices
HRM

21
The Entrepreneur’s Risky Human Resource
Management Situation
Underdeveloped HRM creates
competitive disadvantage

Lack of specialized HR
expertise

HR Risks in Increased potential for

Small workplace litigation not
addressed
Businesses
Compliance with compensation
regulations and laws

Lack of HRIS systems creates

inefficiencies and data entry
errors
22
 Why HRM Is Important to Small Businesses
• Effective HRM:
• Is a competitive necessity for small firms.
• Makes small firms more successful .
• Helps small firms get and keep large customers.
• Is necessary to meet ISO-9000 requirements
for competing internationally.

23
 Personnel Mistakes
• Hire the wrong person for the job
• Experience high turnover
• Have your people not doing their best
• Waste time with useless interviews
• Have your company in court because of discriminatory actions
• Have your company cited by OSHA for unsafe practices
• Have some employees think their salaries are unfair and inequitable
relative to others in the organization
• Allow a lack of training to undermine your department’s effectiveness
• Commit any unfair labor practices
24
 References
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

• Gary Dessler (2011). Human Resource Management

(Chapter 18-Managing Human Resources in Entrepreneurial
firms) 2011 Pearson Education, Inc. publishing as Prentice
Hall

25