Human Resource Management: From Recruitment to Labor Relations

Human Resources: The People Behind the People

Like a professional sports team, a company is only as good as its workers. If people come to work each day to do their very best, serve their customers, and help their firm compete, it's very likely that company will be a success. The best companies value their employees as much as they value customers—without workers, there would be no goods or services to offer customers. Management at such companies know that hiring good workers—including military veterans—is vital to their overall success. Achieving the highest level of job satisfaction and dedication among employees is the goal of human resource management, which attracts, develops, and retains the employees who can perform the activities necessary to accomplish organizational objectives.

Recruitment and Selection

Nowhere is the role of HR more important than in recruiting and selecting workers for a company. To ensure that candidates bring the necessary skills to the job or have the desire and ability to learn them, most firms implement the recruitment and selection process shown in FIGURE 8.1.

Before seeking candidates for a position, a manager must first determine what tasks are to be done and the best way to accomplish those tasks. This step often leads to a discussion within top management on how staff is currently deployed. For example, do any projects or businesses in the organization have a surplus of workers? Or does the firm have employees on furlough or not working full-time? Senior management is responsible for making sure current employees are working at capacity and at maximum productivity. Even then, a hiring manager must determine whether the company should hire additional employees. Outsourcing the work to an outside firm, using temporary staff, or engaging independent contractors to do the work may be better solutions. Clearly, managers have many choices when it comes to staffing their operations.

FINDING QUALIFIED CANDIDATES

After analyzing the situation, if a manager wants to hire a new employee, he or she needs to think about the type of person to target. This process often begins with the hiring manager generating a document listing the job requirements—the minimum skills, education, and experience a candidate needs for the position. Additionally, the hiring manager must think about the salary or wages and benefits required to attract the appropriate candidate. Hiring managers also guide HR to the likely sources of such individuals. Whether the position calls for a highly technical individual (such as a Web programmer) or an entry-level college graduate, the hiring manager plays an important role in identifying, interviewing, and selecting new employees. In all likelihood, the hiring manager will be working with the new employee, so making the right hiring decision is critical not only to their own success but also to that of their organization.

Besides the traditional methods of recruiting—such as college job fairs, personal referrals, and want ads—most companies now rely on their Web sites for job applicants. A firm's Web site might contain a career section with general employment information and a listing of open positions. Applicants are often able to submit a résumé and apply for an open position online. Internet recruiting is such a quick, efficient, and inexpensive way to reach a large pool of job seekers that the vast majority of companies currently use the Internet, including social networking sites, to fill job openings. This is also the best way for firms to reach new graduates and current workers. Using such social media sites such as LinkedIn or Facebook allows firms to communicate directly with candidates and streamline the selection process.

INTERVIEWING

Probably no conversation is more important or more stressful than a job interview. The interview is a chance for a manager to get to know a candidate, to see how he or she responds to questions, and to assess the candidate's “fit” within the organization. For job seekers, the interview is an opportunity to see an organization up close, perhaps meet their prospective manager, and better understand the job requirements. Finding the right fit is important for both the organization and the candidate

Interviews often start with a manager asking a candidate to “Tell me about yourself” or asking “How did you happen to learn about this opening?” Questions like these help break the ice, put candidates at ease, and allow them to speak with confidence about something they know. As the interview progresses, the interviewer will ask more detailed questions, often based on a candidate's résumé or experience. These types of questions help the interviewer assess whether the candidate has the right skill set, work experience, or on-the-job behaviors that the organization has determined the position needs. For example, suppose the firm wanted an information technology professional whose experience included a major software launch. The interviewer might say to the candidate, “Tell me about a time when you had to implement a companywide software changeover.” Interviews often conclude with questions like, “What contribution would you envision making to ABC Company?” “What would you regard as your greatest accomplishment?” or “What questions do you have for me?” Good candidates will have anticipated a broad range of interview questions and practiced answers to them, demonstrating that they are the right fit for the position and the organization.

After the interviews, a hiring manager will often meet with the HR manager to discuss the candidates. Some will be immediately eliminated as they lacked some of the requirements, they appeared unprepared for the interview, or were not a good fit for the organization. The remaining candidates are typically ranked, and the top three or four selected for a next round of interviewing, possibly with other members of the management team, prospective colleagues, or senior employees. The HR manager will then begin checking references, verifying past employment, and confirming that the candidate has the degrees and certificates that they are claiming on their application. Managers might also Google the candidate to see what else they might learn about the individual. For certain positions, some organizations perform a background check of the top candidates. Once this process is completed, the HR manager and the hiring manager will meet and review the information. As this point, the top candidate is selected and the HR manager will contact the individual to offer them a position. Pay, benefits, and work responsibilities are discussed and placed in an offer letter. If the terms are acceptable, the candidate typically signs and returns a copy of the offer letter, and the start date is determined.

LEGAL ASPECTS OF HIRING EMPLOYEES

When hiring employees, every firm must follow state and federal employment laws. Title VII of the Civil Rights Act of 1964 prohibits employers from discriminating against applicants based on their race, religion, color, gender, or national origin. The Americans with Disabilities Act of 1990 prohibits employers from discriminating against disabled applicants. The Civil Rights Act created the Equal Employment Opportunity Commission (EEOC) to investigate discrimination complaints. The Uniform Employee Selection Guidelines were adopted by the EEOC in 1978 to further clarify ways in which employers must ensure that their employees will be hired and managed without discrimination.² The EEOC also helps employers set up affirmative action programs to increase job opportunities for women, minorities, people with disabilities, and other protected groups. The Civil Rights Act of 1991 expanded the alternatives available to victims of employment discrimination by including the right to a jury trial, punitive damages, and damages for emotional distress. At the same time, opponents to such laws have launched initiatives to restrict affirmative action standards and protect employers against unnecessary litigation.

Orientation, Training, and Evaluation

Once hired, employees need to know what is expected of them and how well they are performing. Companies provide this information through orientation, training, and evaluation. New hires may complete an orientation program administered jointly by HR and the department in which they will work. During orientation, employees learn about company policies regarding their rights and benefits. They might receive an employee manual that includes the company's code of ethics and code of conduct. And they'll usually receive some form of training.

TRAINING PROGRAMS

Training is a good investment for both employers and employees. Training helps workers build their skills and knowledge, preparing them for new job opportunities within the company. It also gives employers a better chance of retaining long-term, loyal, high-performing workers. Companies of all sizes take creative approaches to training. Nugget Market, a supermarket chain on Fortune's list of “The 100 Best Companies to Work For,” rolls out continuous information about products, the company, and updates from executives on a large, flat-screen monitor in each store. Employees who watch—and absorb—the information are eligible for bonus rewards that range from $20 to $1,000.³

• On-the-job training, a popular teaching method, prepares employees for job duties by allowing them to perform tasks under the guidance of experienced employees. A variation of on-the-job training is apprenticeship training, in which an employee learns a job by serving for a time as an assistant to a trained worker. American apprenticeships usually focus on blue-collar trades—such as plumbing and heating services—whereas in Europe, many new entrants to white-collar professions complete apprenticeships. McDonald's sponsors apprenticeship-training programs in its UK restaurants as part of an economic stimulus plan launched by the British government. Offering 10,000 apprenticeships per year, the company says, “We're as serious about education as we are about burgers and fries.”⁴
• Classroom and computer-based training offer another option. Many firms are replacing classroom training with computer-based training programs, which can significantly reduce costs. Computer-based training offers consistent presentations along with videos that can simulate the work environment. Employees can learn at their own pace without having to sign up for a class. Through online training programs, employees can engage in interactive learning—they might conference with a mentor or instructor located elsewhere or they might participate in a simulation requiring them to make decisions related to their work.

PERFORMANCE APPRAISALS

Feedback about performance is the best way for a company—and its employees—to improve. Most firms use an annual performance appraisal to evaluate an employee's job performance and provide feedback about it. A performance appraisal can include assessments of everything from attendance to goals met. Based on this evaluation, a manager will make decisions about compensation, promotion, additional training needs, transfers, or even termination. Performance appraisals are common, but not everyone agrees about their usefulness.

Some management experts argue that a performance review is skewed in favor of a single manager's subjective opinion—whether it's positive or negative—and that most employees are afraid to speak honestly to their managers during a performance review. If a performance review is to be at all effective, it should meet the following criteria:

• Establish clear, measurable, agreed-upon objectives
• Have thorough documentation
• Be a formal midyear evaluation
• Consist of frequent meetings with meaningful feedback (no conflict avoidance!)⁵

Compensation

Compensation—how much employees are paid in money and benefits—is one of the most highly charged issues that HR managers face. The amount employees are paid, along with whatever benefits they receive, has a tremendous influence on where they live, their lifestyle, and how they spend their leisure time. Compensation also affects job satisfaction. Balancing compensation for employees at all job levels can be a challenge for human resource managers.

The terms wages and salary are often used interchangeably, but they actually are different. A wage is based on an hourly pay rate or the amount of work accomplished. Typical wage earners are factory workers, construction workers, auto mechanics, retail salespeople, and restaurant servers. A salary is calculated periodically, such as weekly or monthly. Salaried employees receive a set amount of pay that does not fluctuate with the number of hours they work: wage earners may receive overtime pay, and salaried workers do not. Office personnel, executives, and professional employees usually receive salaries.

Most firms base their compensation policies on the following factors:

• What competing companies are paying
• Government regulation
• Cost of living
• Company profits
• An employee's productivity

Many firms try to balance rewarding workers with maintaining profits by linking more of an employee's pay to superior performance. Firms try to motivate employees to excel by offering some type of incentive compensation in addition to salaries or wages. FIGURE 8.2 lists four common types of incentive compensation programs.

• Profit sharing, which awards bonuses based on company profits

• Gainsharing, a company's sharing of the financial value of productivity gains, cost savings, or quality improvements with its workers
• Lump-sum bonuses and stock options, which provide one-time cash payments and the right to purchase company stock based on performance
• Pay for knowledge, which distributes wage or salary increases as employees learn new job tasks

EMPLOYEE BENEFITS

In addition to wages and salaries, firms provide benefits to employees and their families as part of their compensation. Employee benefits—such as vacation, retirement plans, profit-sharing, health insurance, gym memberships, child and elder care, and tuition reimbursement—are sometimes offered by the employer. Benefits represent a large component of an employee's total compensation. Although wages and salaries account for around 70 percent of the typical employee's compensation, the other 30 percent takes the form of employee benefits.⁶ TABLE 8.1 shows the breakdown of an average worker's benefits as compared to wages or salary.

Some benefits are required by law. U.S. firms are required to make Social Security and Medicare contributions, as well as payments to state unemployment insurance and workers' compensation programs, which protect workers in case of job-related injuries or illnesses. The Family and Medical Leave Act of 1993 requires covered employers to offer up to 12 weeks of unpaid, job-protected leave to eligible employees. Firms voluntarily provide other employee benefits, such as child care and health insurance, to help them attract and retain employees. Some states, such as California, New Jersey, and Washington, have laws mandating paid family leave.

In the past, companies have paid the greater share of the cost of health care benefits, with employees paying a much smaller share. However, as health care costs rise, employers are passing along premium increases to employees. Many companies now offer incentives for workers to live healthier lives. Gym memberships, nutrition programs, wellness visits to the doctor, and smoking-cessation classes are all examples of these incentives. At Qualcomm, a global mobile technologies firm, employee benefits include unlimited sick days, on-site gyms, tuition assistance, and work-life balance programs like job sharing, compressed workweeks, and telecommuting. In addition, Qualcomm provides a generous company match on its retirement savings plan and pays 100 percent of the monthly health insurance premium.⁷

Retirement plans make up a chunk of employee benefits. Some companies have reduced the contributions they make to workers' 401(k) plans—retirement savings plans to which employees can make pretax contributions. Some firms have cut back on cash contributions to the plans and contribute company stock instead. However, others provide a high level of funding. Raytheon Solipsys offers a 401(k) with company match of up to 200 percent on employee contributions.⁸

FLEXIBLE BENEFITS

In response to increasing diversity in the workplace, firms look for creative ways to structure their benefit plans to the needs of employees. One approach offers flexible benefits, also called a cafeteria plan. Under this system, employees have a choice of benefits, including different types of medical insurance, dental and vision plans, and life and disability insurance. Typically, each employee receives a set allowance (called flex dollars or credits) to pay for benefits, depending on his or her needs. One working spouse, for example, might choose medical coverage for the entire family while the other spouse uses benefit dollars to elect other types of coverage. Contributions to cafeteria accounts can be made by both the employee and employer. Cafeteria plans also offer tax benefits to both employees and employers.

Another way of increasing the flexibility of employee benefits involves time off from work. Instead of establishing set numbers of holidays, vacation days, and sick days, some employers give each employee a bank of paid time off (PTO). Employees use days from their PTO account without having to explain why they need the time. The greatest advantage of PTO is the freedom it gives workers to make their own choices; the greatest disadvantage is that it is an expensive benefit for employers.

FLEXIBLE WORK

Some firms are moving toward the option of flexible work plans, which are benefits that allow employees to adjust their working hours or places of work according to their needs. Flexible work plan options include flextime, compressed workweeks, job sharing, and home-based work (telecommuting). These benefit programs have reduced employee turnover and absenteeism and boosted productivity and job satisfaction. Flexible work has become critical in attracting and keeping talented human resources.

• Flextime allows employees to set their own work hours within certain parameters. Rather than mandating that all employees work, say, from 8:00 a.m. to 5:00 p.m., a manager might stipulate that everyone works between the core hours of 10:00 a.m. and 3:00 p.m. Outside the core hours, employees could choose to start and end early or start and end late.

• Some companies offer a compressed workweek, which allows employees to work longer hours on fewer days. Employees might work four 10-hour days and then have three days off each week.
• A job sharing program allows two or more employees to divide the tasks of one job. This plan appeals to a growing number of people—such as students, working parents, and people of all ages who want to devote time to personal interests—who prefer to work part-time rather than full-time. Job sharing requires a lot of cooperation and communication between the partners, but an employer can benefit from the talents of both people.
• Home-based work programs allow employees to become telecommuters, performing their jobs from home via the Internet, voice and video conferencing, and mobile devices.

Employee Separation

Employee separation is a broad term covering the loss of an employee for any reason, voluntary or involuntary. Voluntary separation includes workers who resign to take a job at another firm or start a business. Involuntary separation includes downsizing, outsourcing, and dismissal.

VOLUNTARY AND INVOLUNTARY TURNOVER

Turnover occurs when an employee leaves a job. Voluntary turnover occurs when the employee resigns—perhaps to take another job that pays better, start a new business, or retire. The human resource manager might conduct an exit interview with the employee to learn why he or she is leaving; this conversation can provide valuable information to a firm. An employee might decide to leave because of lack of career opportunities. Learning this, the human resource manager might offer ongoing training. Sometimes employees accept jobs at other firms because they fear upcoming layoffs. In this case, the human resource manager might be able to allay fears about job security.

Involuntary turnover occurs when employees are terminated because of poor job performance or unethical behavior. No matter how necessary a termination may be, it is never easy for the manager or the employee. The employee may react with anger or tears; co-workers may take sides. Managers should remain calm and professional and must be educated in employment laws. Protests against wrongful dismissal are often involved in complaints filed by the EEOC or by lawsuits brought by fired employees. Involuntary turnover also occurs when firms are forced to eliminate jobs as a cost-cutting measure, as in the case of downsizing or outsourcing.

DOWNSIZING

As the economy tightens, companies are often faced with the hard choice of terminating employees in order to cut costs or streamline the organization. Downsizing is the process of reducing the number of employees within a firm by eliminating jobs. Downsizing can be accomplished through early retirement plans or voluntary severance programs.

OUTSOURCING

Firms also shrink themselves into leaner organizations by outsourcing. Outsourcing involves transferring jobs from inside a firm to outside the firm. Jobs that are typically outsourced include office maintenance, deliveries, food service, and security. However, other job functions can be outsourced as well, including manufacturing, design, information technology, and accounting. In general, in order to save expenses and remain flexible, many companies try to outsource functions that are not part of their core business.

Motivating Employees

Everyone wants to enjoy going to work. Smart employers know that and look for ways to motivate workers to commit to their company's goals and perform their best. Motivation starts with high employee morale—a positive attitude toward the job. Each year, Fortune announces its list of the “100 Best Companies to Work For.” The most recent top ten are listed in TABLE 8.2. Based on these rankings, it's reasonable to believe that employees at these firms tend to have higher morale because they feel valued and empowered.

High morale generally results from good management, including an understanding of human needs and an effort to satisfy those needs in ways that move the company forward. Low employee morale, on the other hand, usually signals a poor relationship between managers and employees and often results in absenteeism, voluntary turnover, and a lack of motivation.

Generally speaking, managers use rewards and punishments to motivate employees. Extrinsic rewards are external to the work itself, such as pay, fringe benefits, and praise. Intrinsic rewards are feelings related to performing the job, such as feeling proud about meeting a deadline or achieving a sales goal. Punishment involves a negative consequence for such behavior as being late, skipping staff meetings, or treating a customer poorly.

There are several theories of motivation, all of which relate back to the basic process of motivation itself, which involves the recognition of a need, the move toward meeting that need, and the satisfaction of that need. For instance, if you are hungry you might be motivated to make yourself a peanut butter sandwich. Once you have eaten the sandwich, the need is satisfied and you are no longer hungry. FIGURE 8.3 illustrates the process of motivation.

MASLOW'S HIERARCHY OF NEEDS THEORY

The studies of psychologist Abraham H. Maslow suggest how managers can motivate employees. Maslow's hierarchy of needs has become a widely accepted list of human needs based on these important assumptions:

• People's needs depend on what they already possess.
• A satisfied need is not a motivator; only needs that remain unsatisfied can influence behavior.
• People's needs are arranged in a hierarchy of importance; once they satisfy one need, at least partially, another emerges and demands satisfaction.

According to the theory, people have five levels of needs that they seek to satisfy: physiological, safety, social, esteem, and self-actualization.

In his theory, Maslow proposed that all people have basic needs such as hunger and protection that they must satisfy before they can consider higher-order needs such as social relationships or self-worth. He identified five types of needs:

1. Physiological needs include food, shelter, and clothing. On the job, employers satisfy these needs by paying salaries and wages and providing a temperature-controlled workspace.
2. Safety needs refer to desires for physical and economic protection. Companies satisfy these needs with benefits like health insurance and meeting safety standards in the workplace.
3. Social (belongingness) needs refer to people's desire to be accepted by family, friends, and co-workers. Managers might satisfy these needs through teamwork and group lunches.
4. Esteem needs have to do with people's desire to feel valued and recognized by others. Managers can meet these needs through special awards or privileges.
5. Self-actualization needs drive people to seek fulfillment of their dreams and capabilities. Employers can satisfy these needs by offering challenging or creative projects, along with opportunities for education and advancement.⁹

According to Maslow, people must satisfy the lower-order needs in the hierarchy, specifically their physiological and safety needs, before they are motivated to satisfy higher-order needs such as social, esteem, and self-actualization.

OTHER MOTIVATIONAL THEORIES

Equity theory is concerned with an individual's perception of fair and equitable treatment. In their work, employees first consider their effort and then their rewards. Next, employees compare their results against those of their co-workers. As shown in Figure 8.3, if employees feel they are under-rewarded for their effort in comparison with others doing similar work, equity theory suggests they will be motivated to decrease their effort. Conversely, if employees feel they are over-rewarded, they will feel guilty and put more effort into their job to restore equity and reduce guilt.

Goal-setting theory says that people will be motivated to the extent to which they accept specific, challenging goals and receive feedback that indicates their progress toward goal achievement. The basic components of goal-setting theory are goal specificity, goal difficulty, goal acceptance, and performance feedback.

Fifty years ago, Peter Drucker introduced a goal-setting technique called management by objectives (MBO) in his book, The Practice of Management. MBO is a systematic approach that allows managers to focus on attainable goals and to achieve the best results based on the organization's resources. MBO helps motivate individuals by aligning their objectives with the goals of the organization, increasing overall organizational performance. MBO clearly outlines people's tasks, goals, and contributions to the company.

MANAGERS' ATTITUDES AND MOTIVATION

A manager's attitude toward his or her employees greatly influences their motivation. Maslow's theory, described earlier, has helped managers understand that employees have a range of needs beyond their paychecks. Psychologist Douglas McGregor, a student of Maslow, studied motivation from the perspective of how managers view employees. After observing managers' interactions with employees, McGregor created two basic labels for the assumptions that different managers make about their workers' behavior and how these assumptions affect management styles:

• Theory X assumes that employees dislike work and try to avoid it whenever possible, so management must coerce them to do their jobs. Theory X managers believe that the average worker prefers to receive instructions, avoids responsibility, takes little initiative, and views money and job security as the only valid motivators—Maslow's lower order of needs.
• Theory Y assumes that the typical person actually likes work and will seek and accept greater responsibility. Theory Y managers assume that most people can think of creative ways to solve work-related problems and should be given the opportunity to participate in decision making. Unlike the traditional management philosophy that relies on external control and constant supervision, Theory Y emphasizes self-control and self-direction—Maslow's higher order of needs.

Another perspective on management, proposed by management professor William Ouchi, has been labeled Theory Z. Organizations structured on Theory Z concepts attempt to blend the best of American and Japanese management practices. This approach views worker involvement as the key to increased productivity for the company and improved quality of work life for employees. Many U.S. firms have adopted the participative management style used in Japanese firms by asking workers for suggestions to improve their jobs and then giving them the authority to implement proposed changes.

Labor–Management Relations

The U.S. workplace is far different from what it was a century ago, when child labor, unsafe working conditions, and a 72-hour workweek were common. The development of labor unions, labor legislation, and the collective bargaining process have contributed to the changed environment. Today's HR managers must be educated in labor–management relations, the settling of disputes, and the competitive tactics of unions and management.

DEVELOPMENT OF LABOR UNIONS

A labor union is a group of workers who have banded together to achieve common goals in the areas of wages, hours, and working conditions. The organized efforts of Philadelphia printers in 1786 resulted in the first U.S. minimum wage—$1 a day. One hundred years later, New York City streetcar conductors were able to negotiate a reduction in their workday from 17 to 12 hours.

Labor unions can be found at the local, national, and international levels. A local union represents union members in a specific area, such as a single community, while a national union is a labor organization consisting of numerous local chapters. An international union is a national union with membership outside the United States, usually in Canada. About 14.8 million U.S. workers—just under 12 percent of the nation's full-time workforce—belong to labor unions.¹⁰ Although only about 8 percent of workers in the private sector are unionized, more than one-third of government workers belong to unions. The largest union in the United States is the 3.2 million-member National Education Association (NEA), representing public school teachers and other support personnel. Other large unions include the 2.1 million members of the Service Employees International Union (SEIU), the 1.6 million members of the American Federation of State, County & Municipal Employees, the 1.4 million members of the International Brotherhood of Teamsters, the 1.3 million members of the United Food and Commercial Workers, and the 538,000 members of the United Automobile, Aerospace and Agricultural Implement Workers of America.¹¹

LABOR LEGISLATION

Over the past century, some major pieces of labor legislation have been enacted, including the following:

• The National Labor Relations Act of 1935 (Wagner Act) legalized collective bargaining and required employers to negotiate with elected representatives of their employees. It established the National Labor Relations Board (NLRB) to supervise union elections and prohibit unfair labor practices such as firing workers for joining unions, refusing to hire union sympathizers, threatening to close if workers unionize, interfering with or dominating the administration of a union, and refusing to bargain with a union.
• The Fair Labor Standards Act of 1938 set the first federal minimum wage (25 cents an hour) and a maximum basic workweek for certain industries. It also outlawed child labor.
• The Taft-Hartley Act of 1947 (Labor–Management Relations Act) limited unions' power by banning such practices as coercing employees to join unions; coercing employers to discriminate against employees who are not union members; discriminating against nonunion employees; picketing or conducting secondary boycotts or strikes for illegal purposes; and excessive initiation fees.
• The Landrum-Griffin Act of 1959 (Labor–Management Reporting and Disclosure Act) amended the Taft-Hartley Act to promote honesty and democracy in running unions' internal affairs. The law requires unions to set up a constitution and bylaws and to hold regularly scheduled elections of union officers by secret ballot. It set forth a bill of rights for union members and required unions to submit certain financial reports to the U.S. Secretary of Labor.

THE COLLECTIVE BARGAINING PROCESS

Labor unions work to increase job security for their members and to improve wages, hours, and working conditions. These goals are achieved primarily through collective bargaining, the process of negotiation between management and union representatives.

Union contracts, which typically cover a two- or three-year period, are often the result of weeks or months of discussion, disagreement, compromise, and eventual agreement. Once agreement is reached, union members must vote to accept or reject the contract. If the contract is rejected, union representatives may resume the bargaining process with management representatives, or union members may strike to obtain their demands.

SETTLING LABOR–MANAGEMENT DISPUTES

Strikes make the headlines, but most labor–management negotiations result in a signed contract without a strike. If a dispute arises, it is usually settled through a mechanism such as a grievance procedure, mediation, or arbitration. Any of these alternatives is quicker and less expensive than a strike.

The union contract serves as a guide to relations between the firm's management and its employees. The rights of each party are stated in the agreement. But no contract, regardless of how detailed, will eliminate the possibility of disagreement. Such differences can be the beginning of a grievance, a complaint by a single employee or by the entire union that management is violating some portion of the contract. Almost all union contracts require these complaints to be submitted through a formal grievance procedure similar to the one shown in FIGURE 8.4. A grievance might involve a dispute about pay, working hours, or the workplace itself. The grievance procedure usually begins with an employee's supervisor and then moves up the company's hierarchy. If the highest level of management can't settle the grievance, it is submitted to an outside party for mediation or arbitration.

Mediation is the process of settling labor–management disputes through an impartial third party. Although the mediator does not make the final decision, he or she hears the whole story and makes objective recommendations. If the dispute remains unresolved, the two parties can turn to arbitration—bringing in an outside arbitrator who renders a legally binding decision. The arbitrator must be acceptable both to the union and to management, and his or her decision is final. Most union negotiations go to arbitration if union and management representatives fail to reach a contract agreement.

Both unions and management use tactics to make their views known and to win support. Generally, unions are concerned with issues such as pay, job security, and benefits. Unions generally want to improve compensation and security for their members. They are also concerned about the overall health of the business and will make concessions if they feel that they need to in order for the company to continue to operate. Managers think about many of the same issues but are primarily concerned with the competitiveness of their business. Financial performance is the most important element because if the business cannot thrive, there will be no money to pay anyone. Usually, labor and management can come to some understanding and through a process of negotiation arrive at a contract acceptable to both parties. However, if there is an impasse in negotiations the union and management may need to resort to other means to get their needs met.

THE COMPETITIVE TACTICS OF UNIONS

Unions chiefly use three tactics—strikes, picketing, and boycotts—to press for what they want:

• The strike, or walkout, is one of a union's most effective tools. It involves a temporary work stoppage by workers until a dispute has been settled or a contract signed. A strike generally seeks to disrupt business as usual, calling attention to workers' needs and union demands. Strikes can last for days or weeks and can be costly to both sides. In addition, strikes are often damaging to the very people the union is trying to help—for example, students lose valuable class time when teachers go on strike. Surrounding businesses may suffer, too. If striking workers aren't eating at their usual lunch haunts, those businesses will lose profits. Strikes seem to be on the decline, however. During the last decade, there were an average of 16 major work stoppages per year, half the number that took place in the 1990s.¹²
• Picketing consists of workers marching in a public protest against their employer. As long as picketing does not involve violence or intimidation, it is protected under the U.S. Constitution as freedom of speech. Picketing may accompany a strike, or it may be a protest against alleged unfair labor practices. During a recent labor dispute, Verizon union workers set up picket lines to show solidarity with other Verizon striking union members on the East Coast.¹³

• A boycott is an organized attempt to keep the public from purchasing a firm's goods or services. Some unions have been quite successful in organizing boycotts, and some unions even fine members who defy a boycott.

THE COMPETITIVE TACTICS OF MANAGEMENT

Management also has tactics for competing with organized labor when negotiations break down. In the past, it has used the lockout—a management “strike” to put pressure on union members by closing the firm. More commonly, however, organizations try to recruit strikebreakers (in highly visible fields such as professional sports) or transfer supervisors and other nonunion employees to continue operations during strikes. When union workers at British Airways went on strike, management leased aircraft from other airlines and used volunteer pilots and managers to take the place of the striking cabin crews.¹⁴

In extreme cases, management might go so far as to close the plant and outsource the work to another company or even shut down the operation entirely and file for bankruptcy, such as what happened with Hostess Brands, bakers of the iconic Twinkie and other snack cakes. After failing to reach an agreement with the union, Hostess filed for bankruptcy. Private equity groups Apollo Global Management and Metropolis & Co.—now doing business as Hostess Brands—paid $410 million to buy the Hostess and Dolly Madison snack cake lines as well as five plants as part of the company's liquidation process. And soon after, they relaunched the iconic products.¹⁵

THE FUTURE OF LABOR UNIONS

Union membership and influence grew through most of the 20th century by giving industrial workers a voice in decisions about their wages, benefits, and working conditions. However, as the United States, western Europe, and Japan have shifted from manufacturing economies to information and service economies, union membership and influence have declined. In a recent year, about 11.3 percent of wage and salary workers belonged to a union, down from 11.8 percent the year before. Subsets of that group have also seen a decline: 6.6 percent of private sector workers belonged to a union, down from 6.9 percent the previous year.¹⁶

How can labor unions change to maintain their relevance? They can be more flexible and adapt to a global economy and diverse workforce. They can respond to the growing need for environmentally responsible business and manufacturing processes. Unions can establish collaborative relationships with human resource managers and other managers. And they can recognize the potential for prosperity for all—management and union workers included.

NOTES

1. Bureau of Labor Statistics, “Employment Situation of Veterans Summary,” news release, March 20, 2013, http://www.bls.gov; “Disney to Hire 1,000 Vets, Launches PR Campaign,” West Orlando News, March 13, 2012, http://westorlandonews.com; Halimah Abdullah, “Hiring Our Heroes: McChrystal on Hiring Veterans: We Need to Understand Where Soldiers Come From,” MSNBC, March 26, 2012, http://hiringourheroes.today.com; company Web site, “Walmart U.S. CEO Bill Simon Calls on Veterans to Help Lead an ‘American Renewal,’” press release, August 31, 2011, http://news.walmart.com.

2. Government Web site, “Fact Sheet on Employment Tests and Selection Procedures,” http://eeoc.gov, accessed April 24, 2013.

3. “100 Best Companies to Work For (2013),” CNN Money.com, http://money.cnn.com, accessed April 24, 2013; “Nugget Market” in “100 Best Companies to Work For (2013),” CNN Money.com, http://money.cnn.com, accessed April 24, 2013; company Web site, “Nugget Markets Ranked in FORTUNE Magazine's ‘100 Best Companies to Work For’ List for Seventh Consecutive Year,” press release, January 20, 2012, http://www.nuggetmarket.com.

4. Tricia Phillips, “Job Focus: How to Get an Apprenticeship,” Mirror, March 8, 2013, http://www.mirror.co.uk; company Web site, “McDonald's Puts Apprenticeships on the Menu,” http://www.aboutmcdonalds.com, accessed April 24, 2013.

5. Victor Lipman, “4 Steps to Painless (and Effective) Performance Evaluations,” Forbes, October 4, 2012, http://www.forbes.com.

6. Bureau of Labor Statistics, “Employer Costs for Employee Compensation,” press release, March 12, 2013, http://www.bls.gov.

7. Company Web site, “Benefits Overview,” http://www.qualcomm.com, accessed April 24, 2013; “100 Best Companies to Work For 2012: Best Benefits,” Fortune, February 6, 2012, http://money.cnn.com.

8. Company Web site, “Careers,” http://www.solipsys.com, accessed April 24, 2013.

9. “Abraham Maslow's Hierarchy of Needs,” Accel-Team.com, http://www.accel-team.com, accessed April 24, 2013.

10. Bureau of Labor Statistics, “Union Membership News Release,” January 23, 2013, http://www.bls.gov.

11. Organization Web site, http://www.afscme.org, accessed April 24, 2013; organization Web site, http://www.seiu.org, accessed April 24, 2013; organization Web site, http://www.teamster.org, accessed April 24, 2013; organization Web site, http://www.ufcw.org, accessed April 24, 2013; John C. Henry, “Largest Unions Pay Leaders Well, Give Extensively to Democrats,” Milwaukee Journal Sentinel, March 3, 2011, http://www.jsonline.com.

12. Bureau of Labor Statistics, “Work Stoppages Summary,” news release, February 8, 2013, http://www.bls.gov.

13. Steve Greenhouse, “4-Year Deals for Unions at Verizon,” New York Times, September 19, 2012, http://www.nytimes.com.

14. “BA: United We Stand Campaign,” http://archive.unitetheunion.org, accessed April 24, 2013; “BA Strike: Airline and Union Agree to End Dispute,” BBC, May 12, 2011, http://www.bbc.co.uk.

15. Associated Press, “Hostess Reopens Bakery for Twinkies, Ho Hos,” USA Today, April 29, 2013, http://www.usatoday.com; Rachel Feintzeig, “New Twinkie Maker Shuns Union Labor,” Wall Street Journal, April 23, 2013, http://online.wsj.com.

16. Organization Web site, “About the American Postal Workers Union,” http://www.apwu.org, accessed April 24, 2013; Bureau of Labor Statistics, “Union Members—2012,” news release, January 23, 2013, http://www.bls.gov.