Wells Fargo scandal is perfect example how not to run a company and how not to do things. There was not any single thing which went right and ethically in this very case – in my opinion. The basic rights of employees were not followed and wellbeing at work were extremely low. Many employees felt they are all the time under huge pressure of making more sales and they are not even allowed to go home from work before they reach the sales targets for each day. 

Employee engagement wasn’t Wells Fargo’s strongest field either. When setting unrealistic goals, it leads employees feel stressed. Many employees said to reporters that they are eating even medication for anxiety. Clearly there was not any employee development going on and they did not acknowledge their employees. There was lots of micromanaging which is a red flag when implementing great employee engagement.

There were many things wrong in HR of Wells Fargo. Some of the most important human resource laws and regulations are, for example, confidentiality, discrimination and favoritism as well as safety. (Chrisos 2019) Many times when employees contacted and informed HR either called to the confidential ethics hotline that there are illegal and unethical activity, they were fired few days after. I think this is one of the worst things you can do to make the employees feel unsafe at work. If there is something wrong and you confidentially tell about it but end up being fired – it is outrageous. There were also many allegations that Well Fargo did not pay for overtime, and that these kind of “wage-theft” complaints and related class action lawsuits go back in 1999. In my opinion, it is bizarre that this company has not been in bigger trouble before since clearly unethical things have been going on for a long time in this company.

The human resource strategy was not the strongest at Wells Fargo. If they would have done it well, they could have got better work culture, increased job satisfaction as well as improved rates of customer satisfaction. 

Exit management did not go well either in this case. Wells Fargo was firing people after they pointed out something was not right within the company. Even you fire people, they are the worst or best PR you can have. Clearly people do not want to work at Wells Fargo after hearing what current and former employees are telling about the company and how they manage things.

Overall, Wells Fargo did not just lose their employees trust – they also lost their customers’ trust. I, myself, would not want to put my money with company who is treating their employees unethically but also creating fake accounts in the name of customers. It is very wrong. After watching many videos where former CEO, John Stumpf, is talking and telling he did not know what is going on, it seems like a big lie. Since there has been unethical things going on since 1999, it is not possible that the top management would not know about these things. After reading through Wells Fargo’s Code of Ethics and Business Conduct, it is hard to believe anything they state. It looks great and says the right things, yet in my opinion it is very difficult to change consumers’ minds after such a huge fiasco. They will have a very long way to go before they can gain people’s trust again – or if they will ever do.

References

Chrisos, M. 2019.What are some of the legal issues in human resources? URL: https://www.techfunnel.com/hr-tech/what-are-some-of-the-legal-issues-in-human-resources/. Accessed: 1 March 2020

Egan, M. 2016. Workers tell Wells Fargo horror stories. URL: https://money.cnn.com/2016/09/09/investing/wells-fargo-phony-accounts-culture/index.html. Accessed: 4 May 2020

Egan, M. 2016. I called the Wells Fargo ethics line and was fired. URL: https://money.cnn.com/2016/09/21/investing/wells-fargo-fired-workers-retaliation-fake-accounts/index.html. Accessed: 4 May 2020

Egan, M. 2016. Wells Fargo made me work overtime – without extra pay. URL: https://money.cnn.com/2016/09/30/investing/wells-fargo-workers-wage-theft-overtime/index.html. Accessed: 4 May 2020

Egan, M. 2016. Letter warned Wells Fargo of ‘widespread’ fraud in 2007 – exclusive. URL:https://money.cnn.com/2016/10/18/investing/wells-fargo-warned-fake-accounts-2007/index.html. Accessed: 4 May 2020

Egan, M. 2016. Inside Wells Fargo, workers say the mood is grim. URL: https://money.cnn.com/2016/11/03/investing/wells-fargo-morale-problem/index.html. Accessed: 4 May 2020

Wells Fargo 2017. Our Code of Ethics & Business Conduct Living Our Vision & Values. URL: https://www08.wellsfargomedia.com/assets/pdf/about/corporate/code-of-ethics.pdf. Accessed: 4 May 2020

1.1       Key concepts

”Strategic human resource management is the connection between a company’s human resources and its strategies, objectives, and goals. The aim of strategic human resource management is to:

• Advance flexibility, innovation, and competitive advantage.
• Develop a fit for purpose organizational culture.
• Improve business performance.” (Sawyer 2019)

”Companies are more likely to be successful when all teams are working towards the same objectives. Strategic HR carries out analysis of employees and determines the actions required to increase their value to the company. Strategic human resource management also uses the results of this analysis to develop HR techniques to address employee weaknesses. The following are benefits of strategic human resource management:

• Increased job satisfaction.
• Better work culture.
• Improved rates of customer satisfaction.
• Efficient resource management.
• A proactive approach to managing employees.
• Boost productivity.” (Sawyer 2019)

”Organizations must take several steps to implement strategic planning successfully. The strategic planning process begins with the organization’s strategic planning team asking four critical questions, answers to which form the basis of the strategic planning process: 

• Where are we now? (Assess the current situation.)
• Where do we want to be? (Envision and articulate a desired future.)
• How do we get there? (Formulate and implement a strategy and strategic objectives.)
• How will we know if we are on track toward our intended destination? (Establish a mechanism to evaluate progress.)” (SHRM 2015)

“The major HR challenges facing managers today can be divided into three categories: environmental challenges, organizational challenges, and individual challenges. The environmental challenges are rapid change, the rise of Internet, workforce diversity, economic globalization, legislation, evolving work and family roles, skill shortages and the rise of the service sector, and catastrophic events as a result of natural disasters and terrorism. The organizational challenges are choosing a competitive position, decentralization, downsizing, organizational restructuring, the rise of self-managed work teams, the increased number of small businesses, organizational culture, advances in technology, and the rise of outsourcing. The individual challenges involve maching people with the organization, treating employees ethically and engaging in socially responsible behaviour, increasing individual productivity, deciding whether to empower employees, taking steps to avoid brain drain, and dealing with issues of job insecurity.” (Gomez-Mejia, Balkin & Cardy 2016)

In a summary, strategic HR planning requires that several things are being thought carefully. It is essential to check where your company’s HR plan stands now, where you want to aim, how to develop it and how to audit it constantly. There are several challenges, around the subject, which makes it diverse. HR people need to be able to hold the rein. Once company’s strategic planning has been done well, it will nourish the whole company – inside and out.

1.2       Case

As in the case about ‘Child refugees in Turkey making clothes for UK shops’ (BBC 2016), it is a very challenging topic. Companies should constantly audit their manufacturer and everyone involved in the supply chain. News about child labor will always spread with rapid speed and can make a very bad impact on company’s sales and reputation. It is not acceptable nowadays anymore to say that the company wasn’t aware of bad work conditions. They should know better, and if they don’t – they should invest more for auditing. Companies should also be aware how are the legislations and minimum wages in each country where they operate. Once you know the laws and audit constantly, there won’t be any surprise behind the corner. This is how you succeed in the evolving business world.

1.3       References 

BBC. 2016. Child refugees in Turkey making clothes for UK shops. URL: https://www.bbc.com/news/business-37716463. Accessed; 19 April 2020

Gomez-Mejia, L.R., Balkin, D.B. and Cardy, R.L. 2016. Managing Human Resources. Global Edition 8/E. Pearson. London.

Sawyer, K. 2019. 7 steps to strategic human resource management. URL: https://www.deputy.com/blog/7-steps-to-strategic-human-resource-management. Accessed: 19 April 2020

SHRM. 2015. Engaging in strategic planning. URL: https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/engaginginstrategicplanning.aspx. Accessed: 19 April 2020

1.1      Key concepts

“An employee may be separated as consequence of resignation, removal, death, permanent incapacity, discharge or retirement. The employee may also be separated due to the expiration of an employment contract or as part of downsizing of the workforce. Organizations should never harass the employees, especially in the case of resignation, just because they are quitting the organiza­tion. In fact, a quitting employee of the organization must be seen as a potential candidate of the future for the organization and also the brand ambassador of its HR policies and practices. However, many organizations are still treating their employees as “expendable resources” and discharging them in an unplanned manner whenever they choose to do so.” (Whatishumanresource n.k.)

“Employee separation have both costs and benefits. The costs include:

1. Recruitment costs
2. Selection costs
3. Training costs
4. Separation costs

The benefits are:

1. Reduced labor costs
2. Replacement of poor performers
3. Increased innovation
4. The opportunity for greater diversity” (Gomez-Mejia, Balkin & Cardy 2016)

“Employees may leave either voluntary or involuntarily. Voluntary separations include quits and retirements. Involuntary separations include discharge and layoffs. When an employee is forced to leave involuntarily, a much greater level of documentation is necessary to show that a manager’s decision to terminate the employee was fair.” (Gomez-Mejia, Balkin & Cardy 2016)

“Early retirement is also an offer made by employers who seek to cut costs and encourage highly paid employees to leave their employment by retiring early. Usually, the early retirement option is accompanied by financial incentives.” (Heathfield 2018) When thinking about early retirement as an option, it is essential to present the idea of it to the employees so that they don’t feel offended and forced to leave. It might be rather sensitive subject for someone.

“Some tips on how to handle layoffs are:

• Communicate widely and often
• Fill in information gasps for you employees
• Give the most pressing information first
• Never delegate pain
• Deliver the message personally and respectfully – and listen
• Provide outplacement support
• Support survivors, too
• CEOs: Be front and center” (Robbins 2009)

”Generally, outplacement involves a company hiring an outside service provider to assist departing employees with their career transitions. Among the typical services offered are personal career coaching, resume reviews, and interview practice. One major reason so many more companies have invested in outplacement services in recent years is better brand management. Just a couple decades ago, unhappy employees could do little to let anyone outside their immediate circle know about negative experiences with a company. This negative commentary from former employees can have major consequences for companies. In the ‘2017 CareerArc Employer Branding study’, 66 percent of candidates reported they had shared their negative thoughts about an employer that had laid them off, and 64 percent of consumers reported they had stopped purchasing products from a brand after hearing news of that company’s poor employee treatment. Furthermore, employees’ negative reviews can make it hard for the company to recruit and retain talent in the future. If job seekers consistently hear reports of poor treatment from an organization, few will want to take a job with said organization.” (Riemer 2019)

In a summary, a proper exit management is well-needed. It needs to be handled with respect towards everyone. It is essential to have specific plan in case of layoffs. Employees of the companies are considered as the best or worse PR you can have. If you treat everyone well, even in the case of layoffs, for sure they will be positive when talking about the company and don’t necessarily have negative feelings and won’t stop buying your products. There are several companies offering outplacement, which could be more beneficial since these companies focus on this very specific subject – and know how to do it well.

1.2      Cases

Considering the case of Nokia, it was not handled well, and it became a PR nightmare. This fiasco also cost loads of money for Nokia. “German government officials launched an investigation and demanded that Nokia pay back subsidies it had received for the plant. Unions called for a boycott of Nokia products. The news was filled with pictures of crying employees and protesters crushing Nokia phones. Ultimately, the shutdown cost Nokia €200 million—more than €80,000 per laid-off employee—not including the ripple effects of the boycott and bad press. The firm’s market share in Germany plunged; company managers estimate that from 2008 to 2010 Nokia lost €700 million in sales and €100 million in profits there.” (Gupta & Sucher 2018) In my opinion there was not enough information to be told to the employees and it was not communicated well with the employees. Considering how much anger there was, Nokia clearly didn’t think through their exit management – or if they even had one. As the result of lacking proper exit management, they lost lots of money, they lost consumers and respect.

1.3      References 

Gomez-Mejia, L.R., Balkin, D.B. and Cardy, R.L. 2016. Managing Human Resources. Global Edition 8/E. Pearson. London.

Gupta, S. & Sucher, S. 2018. Layoffs that don’t break your company. URL: https://hbr.org/2018/05/layoffs-that-dont-break-your-company. Accessed: 19 April 2020

Heathfield, S. 2018. Early retirement is an option for some employees. URL: https://www.thebalancecareers.com/early-retirement-is-an-option-for-some-employees-1918105. Accessed: 19 April 2020

Riemer, Y. 2019. The Outplacement primer: where, why, and how companies are using outplacement. URL: https://www.recruiter.com/i/the-outplacement-primer-where-why-and-how-companies-are-using-outplacement/. Accessed: 19 April 2020

Robbins, S. 2009. How to handle layoffs. URL: https://hbr.org/2009/03/how-to-communicate-layoffs. Accessed: 19 April 2020

Whatishumanresource.com. N.k. Employee separations. URL: http://www.whatishumanresource.com/employee-separations. Accessed: 19 April 2020

Key concepts

According to website Chron (Austin n.k.): “the primary objective of workplace safety is preventing workplace injuries, illnesses and fatalities. Employers develop detailed plans that provide guidance in the event of an accident, fire, natural disaster or other emergency. Workplace safety plans also identify the roles and responsibilities of employers and employees when responding during incidents. For example, some employees are responsible for directing workers to emergency stairwells or exits. Another goal of workplace safety is reducing and removing current dangers to improve working conditions. Mining companies, which have some of the highest rates of work-related injuries and fatalities, may switch to different equipment or employ non-toxic chemicals to reduce hazards on the job.”

“There are two sets of workplace safety laws: workers’ compensation, an employer-funded insurance system that operates at the state level, and the Occupational Safety and Health Act (OSHA), a federal law that mandates safety standards in the workplace.” (Gomez-Mejia, Balkin & Cardy 2016) “Workers’ compensation insurance is part of Finnish social security. It provides cover for all employees and compensation is paid, in accordance with the Employment Accidents Insurance Act, for injuries resulting from an accident at work or an occupational disease.” (IF-Insurance n.k.) “OSHA compels employers to provide a safe and healthy work environment, to comply with specific occupational safety and health standards, and to keep records of occupational injuries and illnesses. Its safety standards are endorced through a system of inspections, citations, fines, and criminal pelalties.” (Gomez-Mejia, Balkin & Cardy 2016)

The most significant safety, health, and behavioural issues for employers are AIDS, violence in the workplace, cumulative trauma disorders, fetal protection, hazardous chemicals and genetic testing. (Gomez-Mejia, Balkin & Cardy 2016)

According to EHS Insight (Trimble 2017) there are 5 steps to developing an effective workplace safety program:

1. Demonstrate company’s commitment to workplace safety
2. Assess workplace risks and hazards
3. Create a written protocol for employees
4. Emphasize employee education
5. Implement and evaluate

Overall, it takes a proper planning and considering all the possible workplace safety and health issues when working on with workplace safety and health plans. You need to be familiar with the regulations and workers’ rights. It is important to really care about your workers and their safety rather than just give them massive workload and too long working hours, money and profits in your mind. You can’t risk safety and health of the employers. It is important to also train and develop your employers so that they handle possible machines better and safely. Knowledge and skills are power. Make sure your employers are up to date how to be safe at work and keep up the good work, without accidents.

Cases 1 & 2, EU statistics and ‘There are no accidents’ video

As seen in the first case (Thomas 2013) it can be lethal to work too many hours. There are certain regulations and laws about how many hours you can work per day in Finland. Same laws are not valid in all the countries. In this very case the worker has serious medical condition and he did not mention that to the company, where he worked. We can’t know if the person would be alive whether he would have mentioned his condition and/or he wouldn’t have worked so many extra hours. In a summary, it is important to give information about your medical stats which may have an effect on your working. Also, the companies should respect that the workers also need free time to relax.

The second case (Morgaine 2018) about wellness programs is very informative and on point. It is important to let your workers know if you have some wellness programs. It is also needed to really think that what kind of wellness program would be most suitable and engaging in your company. It is proven that good, well-planned healthy programs can save money from healthcare expenses. According to this article it is essential to rather motivate people with carrots instead of sticks. Meaning giving for example penalties for smokers will not help them to quit their smoking. It is rather better to award them with something if they reach the goal of quitting smoking.

As seen in ‘Accidents at work statistics’ report (Eurostat 2019) Romania has much more accidents comparing to other countries. Generally, the Eastern European countries have more accidents. Nordic countries have less accidents in general, except Norway – it has almost same level as Belgium. Malta and Cyprus have the lowest rates. 

The video ‘There are no accidents’ (Mildwinter 2016) sums up the thing that accidents are not just accidents. Usually there is something else behind them. It might be that the company did not follow the safety regulations and is neglecting with the safety plans. It is important to point out some specific person to be in charge of the safety planning and keeping track that the workplace is safe for the workers. This is how we can reduce and minimize the risks and accidents.

Similar cases

”Safety is a core value at Electrical Systems and Instrumentation Inc. (ESI). In fact, workers make it the top priority in every situation, says David Ramos, field safety supervisor. The company implemented a tiered approach to its safety auditing, with all levels of employees assigned with a safety activity designed to identify and correct unsafe conditions and behaviors.  The four levels include:

• Management conducts field observations with a focus on top-down safety communications and involvement.
• Field supervision and safety focuses on safety systems, auditing and coaching to ensure that safety compliance goals and safe operations are met.
• Field team members perform behavioral-based safety observations designed to provide field-level observations of safety conditions related to safety systems design. 
• A dedicated electrical safety auditor verifies compliance and competency directly related to electrical activities.” (Smith 2017) 

”Employees at Texas Instruments Inc. worked nearly 34 million hours in 2016, and their lost-time injury rate was .014. Compared to their industry’s average lost-time injury rate of .8, you can tell safety is being done right at Texas Instruments. TI has one of the best safety records in the semiconductor industry, but simply being one of the best isn’t good enough. The company strives to create an injury-free workplace for all employees and continually invests in improving work environments. Through routine programs, facility self-assessments and audits, TI regularly assesses potential employee safety risks and makes corrections and improvements.

The Audit Committee of TI’s board of directors oversees the safety of employees and visitors to facilities. The company also has formal environmental, safety and health (ESH) committees at all of its manufacturing sites, which include manufacturing managers, ESH specialists and employee representatives.” (Smith 2017)

References

Austin, B. N.k. Goals of safety in the workplace. URL: https://smallbusiness.chron.com/goals-safety-workplace-20509.html. Accessed: 5 April 2020

Eurostat. 2019. Accidents at work statistics. URL: https://ec.europa.eu/eurostat/statistics-explained/index.php/Accidents_at_work_statistics. Accessed: 5 April 2020

Gomez-Mejia, L.R., Balkin, D.B. and Cardy, R.L. 2016. Managing Human Resources. Global Edition 8/E. Pearson. London.

IF-Insurance. N.k. Worker’s compensation insurance for Finland. URL: https://www.if-insurance.com/large-enterprises/insurance-solutions/employee-benefits/employee-benefits-in-finland/workers-compensation-finland. Accessed: 5 April 2020

Mildwinter, A. 2016. There are no accidents. Youtube. URL: https://www.youtube.com/watch?v=rV70yGce-ME. Accessed: 5 April 2020

Morgaine, B. 2018. Do corporate wellness programs really work? URL: https://www.liveplan.com/blog/does-corporate-wellness-work-the-surprising-truth-about-employee-wellness-programs/. Accessed: 5 April 2020

Smith, S. 2017. 2017 America’s safest companies. URL: https://www.ehstoday.com/americas-safest-companies-awards/article/21919357/2017-americas-safest-companies. Accessed: 5 April 2020

Thomas, E. 2013. ‘Exhausted’ Merrill Lynch intern died from epileptic fit in shower after he ‘pulled three all-nighters at bank where employees compete to work the longest hours’. URL: https://www.dailymail.co.uk/news/article-2511911/Moritz-Erhardt-exhausted-Merrill-Lynch-intern-died-epileptic-fit.html – ixzz4RTj2xoP1. Accessed: 5 April 2020

Trimble, T. 2017. 5 steps to developing an effective workplace safety program. URL: https://www.ehsinsight.com/blog/5-steps-to-developing-an-effective-workplace-safety-program. Accessed: 5 April 2020

Key concepts

Employee engagement is the key to building a successful business. But driving employee engagement doesn’t come easy: worldwide, only 15% of employees are engaged with their work. In today’s fast-changing business environment, retaining top talent is a top challenge for most businesses. Employee engagement doesn’t mean making your employees happy. Indeed, employee engagement does not mean employee happiness or employee satisfaction. All these concepts are connected. (Jouany & Mäkipää 2020)

Employee engagement is the emotional commitment the employee has to the organization and its goals. This emotional commitment means engaged employees actually care about their work and their company. They don’t work just for a paycheck, or just for the next promotion, but work on behalf of the organization’s goals. When employees care—when they are engaged—they use discretionary effort. Engaged employees lead to better business outcomes. In fact, according to Towers Perrin research companies with engaged workers have 6% higher net profit margins, and according to Kenexa research engaged companies have five times higher shareholder returns over five years.(Kruse 2012)

‘War for talent’-concept means that because of the shortage of skills businesses are currently facing and employees’ expectations (they don’t just look at the benefits, they also take into account the company’s values and the development opportunities you offer), it’s becoming more challenging for businesses to retain their employees. (Jouany & Mäkipää 2020)

According to Mike Kappel (Kappel 2018), there are five ways to encourage employee engagement:

1. Don’t skip onboarding and training
2. Set company goals
3. Acknowledge employees
4. Focus on employee development
5. Don’t micromanage

According to Haygroup’s (HayGroup 2018) Our leadership 2030 research, there are 6 global megatrends that are fundamentally changing relationships between businesses, their customers and employees:

1. Globalization 2.0 – Economic power is shifting from West to East, giving rise to a new global middle class.
2. Environmental crisis – The environment is becoming more and more important to people, as climate change gathers pace and natural resources grow scarce.
3. Demographic change – Aging population are reshaping the global workforce and exacerbating the war for talent.
4. Individualism – Growing freedom of choice is eroding loyalty and transforming workplace motivation.
5. Digitization – Work and the workplace are going remote, and the boundaries between professional and personal life are blurring, as people are increasingly operating online.
6. Technological convergence – Powerful shifts in technology are transforming everyday life and creating new product markets.

Articles & research

Both articles (Kruse 2012 & Kappel 2018) highlight the importance of the employees to feel appreciated at work. Kappel’s article gives accurate information how to encourage employee engagement. Development, training, clear goals and acknowledging employees play a big role in employee engagement. I agree about the micromanaging part, it’s never bringing good results if the managers are scanning everything what employees do and how they do it. It’s important to give the works space and peace to employees to be able to let their creativity flow. It has proven to have great results. HayGroup’s (HayGroup 2018) research about employee engagement megatrends is very thorough and on point. Especially demographic change will have a huge impact to business. Like mentioned in this research, HayGroup has raised the retirement age higher so that elder employees can transfer their knowledge to younger generations. Individualism is something I can see in my own work as well. Work shifts are flexible depending if employees have studies beside of the work or hobbies that require them to do specific work shifts on some days. When employees feel that their personal life is also appreciated, they will enjoy their work more and do it better. Once work site is flexible, the employees will also be. It goes both ways.

Similar cases

Full Contact – Each year, this software firm offers their employees $7,500 to take a “paid paid” vacation. They literally pay them to go on holiday anywhere they like. The only rules? You actually have to go somewhere, and can’t do any work or answer work related calls or messages. They stand by the idea that employees who actually go on vacation without dealing with anything work related return in a better state to work, fully ready and committed to push towards the company aims. Employees also return with a different, fresh outlook. (Maier 2016)

Legal Monkeys – This legal record management company established a simpler, smaller way to show employees that their hard work is valued. Their Appreciation Board is a glass picture frame where employees can write a note and present the board to someone they want to show appreciation to. Whoever receives the board is free to keep it on display on their desk until they are ready to pass it on to someone else. Each achievement also being posted on the company Facebook page to increase visibility outside of the team.

Ideas like this are great. They’re not only simple to implement, and won’t disturb daily workflow, but they build a real-time feedback, encouraging people to give positive feedback and show appreciation for their peers and coworkers.(Maier 2016)

References

HayGroup. 2018. The new rules of employee engagement. URL: http://f.datasrvr.com/fr1/414/25154/Hay_Group_New_Rules_of_Engagement_Report.pdf. Accessed: 15 March 2020

Joyany, V. and Mäkipää, M. 2020. 8 employee engagement statistics you need to know in 2020. URL: https://blog.smarp.com/employee-engagement-8-statistics-you-need-to-know. Accessed: 15 March 2020

Kappel, M. 2018. How to establish a culture of employee engagement. URL: https://www.forbes.com/sites/mikekappel/2018/01/04/how-to-establish-a-culture-of-employee-engagement/ – 6f169cf8dc47. Accessed: 15 March 2020

Kruse, K. 2012. What is employee engagement. URL: https://www.forbes.com/sites/kevinkruse/2012/06/22/employee-engagement-what-and-why/ – 436373037f37. Accessed: 15 March 2020

Maier, S. 2016. 5 companies getting employee engagement right. URL: https://www.entrepreneur.com/article/285052. Accessed: 16 March 2020

Key concepts

The term total compensation is used to describe all forms of monetary payments to an employee. Calculation for it is: total compensation = base salary + incentive compensation. (Money-Zine n.k.) Total compensation (Gomez-Mejia, Balkin & Cardy 2016) has three components: 

• Base compensation – the fixed pay received on a regular basis
• Pay incentives – programs designed to reward good performance
• Benefits or indirect compensation – including health insurance, vacations and perquisites.

Following a prescribed compensation design process can help an organization achieve a balanced and successful pay plan. While each company may need to tweak their methodology slightly to align with their own specific requirements (VanOrnum 2019), the pay options managers need to consider in designing a compensation system are (the book):

1. Internal versus External equity
2. Fixed versus Variable pay
3. Performance versus Membership
4. Job versus Individual pay
5. Egalitarianism versus Elitism
6. Below-market versus Above-market compensation
7. Monetary versus Non-monetary awards
8. Open versus Secret pay
9. Centralization versus Decentralization of pay decisions

Compensation refers to payments, such as salaries, wages and bonuses, that reward employees for their job-related performance. Job-based compensation structure, or job-based pay, is the most traditional type of compensation system in which pay is set on the basis of the job itself. Employees are remunerated on the basis of the jobs they are currently performing. Job-based compensation is in contrast to skill-based pay, which awards employees on the basis of their skill and knowledge level. Job-based compensation structure has several advantages despite being touted as an outdated compensation structure. (Gilani 2017) Different tools to use are, for example: labor market analysis, fair labor standards act (FLSA), salary grades and total compensation calculator. (Merced n.k.)

The legal framework exerts substantial influence on the design and administration of compensation systems. The key federal laws that govern compensation criteria and procedures are the Fair Labor Standards Act, the Equal Pay Act, and the Internal Revenue Code. (O’Reilly n.k.)

Pay-for-performance system, also called incentive systems, reward employee performance on the basis of three assumptions (Gomez-Mejia, Balkin & Cardy 2016):

1. Individual employees and work teams differ in how much they contribute to the firm – not only in what they do, but also in how well they do it.
2. The firm’s overall performance depends to a large degree on the performance of individuals and groups within the firm.
3. To attract, retain and motivate high performers and to be fair to all employees, a company needs to reward employees on the basis of their relative performance.

There are four types of incentive programs. At the level of individual employees, merit pay and bonuses and awards. At the next level, team-based plans, rewarded with bonuses and noncash awards. At the level of plant or business unit it is gainsharing. (Gomez-Mejia, Balkin & Cardy 2016)

The challenges and problems (PayScale 2014) with pay-for-performance are that:

• Not everyone is motivated by money – While the importance of pay can’t be overstated, it remains true that not everyone is motivated by pay. Some employees are motivated by praise, recognition, or the opportunity for better assignments
• The annual raise is not what it used to be
• Many managers are unskilled at giving meaningful evaluations
• The goals aren’t SMART? – SMART? goals are specific, measurable, attainable, realistic, and timely. 

Building a pay-for-performance system is an evolutionary process that must begin with the basics. While ideally all five of the primary issue categories should be addressed before a performance system is instituted, most implementations are not afforded the time. Those overseeing the shift to pay for performance must focus on the essentials through a careful assessment of the most relevant issues to the particular organization. Many pay-for-performance efforts fail because the focus eventually becomes about pay and has little to do with performance. The focus should remain on performance and providing lasting results for organizations. (Gabel, Harker & Sanders 2009)

Case – The Puzzle of motivation

In the video, The Puzzle of Motivation, (Pink 2009) it is stated that rewarding employees with money doesn’t always bring the best performance out of them. According to Dan Pink the 20^th century rewards do work, but only in surprisingly narrow band of circumstances. He also stated that if-then (if you reach this goal, then you get this amount of money) kind of rewards often destroy the creativity. For people it’s far more rewarding if the feel like they are doing something for the sake of themselves. The drive to do things cause their matter. Bringing the rewards to 21^st century is for example this: most of Google’s new products are developed within the 20% free time the employees have. This 20% -free-time-model means that Google’s employees can use 20% of their work time to do anything they want. It has to be something different than their usual work. As stated earlier, not everyone is motivated by money. Employees will perform better in their jobs when they feel engaged and appreciated. They must know and feel that their work is valued. This kind of appreciation will enhance their working.

Other similar cases

For employers looking to keep employees happy, it’s important to develop non-monetary motivational policies that recognize employee efforts effectively. (Smith 2018) Here are few examples:

• Recognition and praise – overall, employees just want to be values for their work, time and effort. In one client employee satisfaction survey, 55% percent of the respondents said that praise and attention from their supervisor would make them feel cared for and valued in the workplace. You could establish a recognition team, identify positive behaviour to reinforce and acknowledge employees often.
• Physical rewards – in some cases, a company can use in inexpensive physical reward like a ticket to a show, a gift card to a local restaurant or a mug.
• Growth or learning opportunities – In one employee engagement survey, 34% of those polled said that career and development opportunities would increase their loyalty.

References

Gabel, L., Harker, K. and Sanders, E. 2009. Avoiding ‘pain for performance’: How to design and implement a pay-for-performance system effectively. URL: Gomez-Mejia, L.R., Balkin, D.B. and Cardy, R.L. 2016. Managing Human Resources. Global Edition 8/E. Pearson. London.. Accessed: 15 March 2020

Gilani, N. 2017. What are the advantages of a job-based compensation structure? URL: https://bizfluent.com/info-8771841-advantages-jobbased-compensation-structure.html. Accessed: 15 March 2020

Gomez-Mejia, L.R., Balkin, D.B. and Cardy, R.L. 2016. Managing Human Resources. Global Edition 8/E. Pearson. London.

Merced – University of California. N.k. Compensation tools. URL: https://hr.ucmerced.edu/compensation/compensation-tools. Accessed: 15 March 2020

Money-Zine. N.k. Total compensation. URL: https://www.money-zine.com/definitions/career-dictionary/total-compensation/. Accessed: 15 March 2020

O’Reilly. N.k. The legal environment and pay system governance. URL: https://www.oreilly.com/library/view/managing-human-resources/9780133029697/xhtml/fileP700049518300000000000000000331C.xhtml. Accessed: 15 March 2020

PayScale. 2014. The top 4 problems with pay for performance. URL: https://www.payscale.com/compensation-today/2014/09/the-top-4-problems-with-pay-for-performance. Accessed: 15 March 2020

Pink, D. 2009. The puzzle of motivation. URL: https://www.ted.com/talks/dan_pink_the_puzzle_of_motivation/up-next?language=en. Accessed: 15 March 2020

Smith, B. 2018. 5 ridiculously useful non-monetary reward examples that improve employee engagement. URL: https://www.business2community.com/human-resources/5-ridiculously-useful-non-monetary-reward-examples-that-improve-employee-engagement-02147022. Accessed: 15 March 2020

VanOrnum, C. 2019. The 4 phase of compensation design. URL: https://hrsoft.com/blog/the-4-phases-of-compensation-design/. Accessed: 15 March 2020

Key concepts

Understanding and complying with HR law is important for three reasons. It helps you to do the right thing, realize the limitations of your firm’s HR and legal departments, and minimize your firm’s potential liability. (Gomez-Mejia, Balkin & Cardy 2016)

Equal Employment Opportunity (EEO) means freedom from discrimination on the basis of protected classes such as race, color, sex, national origin, religion, age, disability or genetic information. (Gomez-Mejia, Balkin & Cardy 2016)

According to Tech Runnel’s article (Chrisos 2019), here are the most important human resource management laws and regulations:

• Confidentiality
• Background checks
• Discrimination and favoritism
• Harassment
• Safety
• Equal pay
• Other payroll issues

According to Ministry of Economic Affairs and Employment of Finland website (Ministry of Economic Affairs and Employment of Finland n.k.): Employment Contracts Act is the basic law regulating employment relationships. It is applied to work performed in employment relationships in both private and public sectors regardless of the nature of the work. Separate provisions exist for public-service relationships. The most important acts applied to employment relationships of individual employees are:

• Employment Contracts Act
• Working Hours Act
• Annual Holidays Act
• Study Leave Act and
• Act on the Protection of Privacy in Working Life.

Human resources discipline policies are designed to provide employees with opportunities to correct objectionable behaviors or to improve job performance. HR discipline policies evolve from training, coaching and counseling through various levels of consequential actions until negative behaviors have been corrected or employment has been terminated. HR discipline policies often follow a format known as progressive discipline. This disciplinary framework provides occasions to establish important documentation and might also include an employee appeals process.(Reynolds n.k.) A company can avoid discipline by recruiting and selecting the right employees for current positions as well as future opportunities, by training and developing workers. (Gomez-Mejia, Balkin & Cardy 2016)

Employees join unions because they want to have someone protecting their rights and benefits. When you have union behind your back, it is easier to negotiate for more favorable working hours, work benefits and salaries. It’s about the quality of work life.

A labor relations strategic plan is a way to allow the parties to move away from simply reacting to each other, towards an approach where they can identify their labor relations goals, determine the strategy needed to reach those goals, and develop the actions needed to carry out that strategy. (FLRA 1999) The labor relations process has three phases: union organizing, collective bargaining and contract administration. (Gomez-Mejia, Balkin & Cardy 2016)

Overall, working in HRM you need to be aware of all the regulations, laws and acts that are part of the hiring process and the whole work cycle. You need to know how to deal with the unions and follow their regulations. Laws and regulations are not the same in each country, when business world today is extremely international, you need to follow how things are in other countries.

Cases 1 & 2

Nowadays there are more and more sexual harassments happening, at least people are informing about them more. Sometimes people don’t realize that even something small thing they say might be taken as harassment, even it would be a joke. In this very case with police deputy inspector Keith Walton, borders were crossed big time. No one, especially someone who’s working as a manager position, should treat others in a bad way. They should give a good example, follow the laws and look after that everyone is being treated with respect. (Mele & Baker 2016)

Well said in an article called Receipt rage (McCarthy 2015): “This type of behaviour, and this case in particular, reveals a side of humanity that you thought was dead.” This case shows the problem nowadays, when social media is blooming and people are writing whatever come to their minds, without really thinking it trough. Same kind of hateful things happen even when people transact with other people during their days. There were inappropriate acts from workers to customers but also the other way around. Especially when working in HRM you need to be sure who you will hire, do proper scanning of job applications and have a good knowledge of people when you are interviewing them. In the worst scenario, you end up hiring someone who is not treating customers with respect and it will end up with a lawsuit from unhappy customer.

Racial slurs and harassment at General Electric

General Electric (Kareem Nittle 2020) came under fire in 2010 when 60 African American workers filed suit against the company for racial discrimination. The black workers say GE supervisor Lynn Dyer called them racial slurs such as the N-word, “monkey,” and “lazy blacks.”

The suit also alleged that Dyer denied bathroom breaks and medical attention to black workers and fired black workers because of their race. In addition, the suit alleged that higher-ups knew about the supervisor’s inappropriate behavior but delayed investigating the matter.

In 2005, GE faced a lawsuit for discriminating against black managers. The suit accused the company of paying black managers less than whites, denying them promotions and using offensive terms to describe blacks. It settled in 2006.

References 

Chrisos, M. 2019.What are some of the legal issues in human resources? URL: https://www.techfunnel.com/hr-tech/what-are-some-of-the-legal-issues-in-human-resources/. Accessed: 1 March 2020

Federal Labor Relations Authority. 1999. General counsel issues guidance on developing a labor relations strategic plan. URL: https://www.flra.gov/092499. Accessed: 1 March 2020

Gomez-Mejia, L.R., Balkin, D.B. and Cardy, R.L. 2016. Managing Human Resources. Global Edition 8/E. Pearson. London.

Kareem Nittle, N. 2020. 5 big companies sued for racial discrimination. URL: https://www.thoughtco.com/big-companies-sued-for-racial-discrimination-2834873. Accessed: 1 March 2020

McCarthy, S. 2015.Receipt rage: Why food is being served with a side of hate. URL: https://www.foxnews.com/food-drink/receipt-rage-why-food-is-being-served-with-a-side-of-hate. Accessed: 1 March 2020

Mele, C. & Baker, A. 2016. New York police inspector is charged with sexually abusing female officer. URL: https://www.nytimes.com/2016/11/19/nyregion/new-york-police-sexual-abuse-of-officer.html?_r=0. Accessed: 1 March 2020

Ministry of Economic Affairs and Employment of Finland. N.k. Employment contract and employment relationship. URL: https://tem.fi/en/employment-contract-and-employment-relationship. Accessed: 1 March 2020

Reynolds, M. N.k. HR discipline policies. URL: https://smallbusiness.chron.com/hr-discipline-policies-59297.html. Accessed: 1 March 2020

Key concepts

Performance appraisal includes the identification, measurement and management of human performance in organizations. Identification means the key areas where the manager will focus when measuring performance. Measurement is the phase where the manager will evaluate how the employee is doing. Management refers to the actual appraisal and how it should be future-oriented, which means that the managers should give constructive feedback and tips how to develop to give better performance at work. Appraisals can be used for administrative and/or development purposes. (Gomez-Mejia, Balkin & Cardy 2016)

The whole performance appraisal process begins by identifying the dimensions on which the managers want to focus on as well as find out how the performance is in the company in different, specific fields.

Tools for measuring the performance:

• Key Performance Indicator (KPI) (Mind Tools Content Team n.k.)
• Productivity tests (Mayhew n.k.)
• 360-degree feedback (Mayhew n.k.)
• Management by objectives (MBO) (Mayhew n.k.)
• Graphic rating scales (The Hartford n.k.)
• Checklists (The Hartford n.k.)

Managers face five challenges in measuring performance: rate errors and bias, the influence of liking, organizational politics, whether to focus on the individual or the group, and legal issues (including discrimination and employment at will). (Gomez-Mejia, Balkin & Cardy 2016) Risks in performance appraisals are that if it’s not done well, in the worst scenario the employee will feel like he/she is not appreciated. Bad appraisal experience may cause the employee to lose his motivation and interest working in the company. 

Overall, performance management is a challenging field. You need to identify clear dimensions, which tools to use for the measurement and how to collect the data and findings as well as how to give the actual feedback in a way which will be done in good terms with the employees. You can’t highlight enough that when having appraisals face-to-face, it needs to be done in a constructive way, which will give helpful tools for the employees to perform better.

Case 1

Like seen in this very specific case (Bumgarner 2011), about performance appraisals, it is crucially important to have professional discussions and feedback about how an employee is doing his/her job, how to develop and what kind of goals there are to be achieved. When this kind of appraisals will be done in a professional and constructive way, it will be rewarding for the employee but as well for the manager. When setting clear goals and giving the instructions how to do and achieve them, it will be easier for the employees also know what is expected from them. Not only the employees need to receive the feedback, also the managers need it. Then the managers will know how they can do their job better and to give more beneficial appraisals for the employees.

Adobe – Learning from a failed experiment

Adobe famously removed all formal performance management from the company, citing the labor-intensive nature of annual reviews and the copious time performance management takes as the reasons for its decision. The experiment failed. Adobe realized no performance management was not working and it needed some kind of solution.

Adobe introduced “Check-in,” its performance management system, to enable seamless performance reviews and to transform the employee experience within the company. This taskforce partnered closely with Adobe’s executive team. They were keenly aware that the ‘check-in’ model needed to be role-modeled from the top for employees to learn by example. 

Adobe made training management a priority within the company. Communication became key. Adobe employees from all levels of the company were included in the decision making process before the implementation of ‘check-in.’ Adobe created a centralized Employee Resource Center to help scale the program. (Maier 2017)

References

Bumgarner, J. 2011. A performance appraisal horror story (with a happy ending). URL: http://www.cascadeemployersblog.com/salarytrends/a-performance-appraisal-horror-story-with-a-happy-ending. Accessed: 27 February 2020

Gomez-Mejia, L.R., Balkin, D.B. and Cardy, R.L. 2016. Managing Human Resources. Appraising and managing performance, pp. 231-262. Global Edition 8/E. Pearson. London.

Maier, S. 2017. How 3 companies benefited by changing performance management. URL: https://www.cmswire.com/digital-workplace/how-3-companies-benefited-by-changing-performance-management/. Accessed: 27 February 2020

Mayhew, R. N.k. Employee performance measurement tools. URL: https://smallbusiness.chron.com/employee-performance-measurement-tools-1952.html. Accessed: 27 February 2020

Mind Tools Content Team. N.k. Performance management and KPIs. URL: https://www.mindtools.com/pages/article/newTMM_87.htm. Accessed: 27 February 2020

The Hartford. N.k. How to measure and evaluate employee performance data. URL: https://www.thehartford.com/business-insurance/strategy/employee-performance/measuring-data. Accessed: 27 February 2020

Key concepts of training and development

Organizational environment is changing with a rapid speed. That brings its own challenges on how to keep the training valid in today’s changing world. Especially when most of the training is online nowadays. There are decisions to be made whether training will take place in a classroom or on the job. When training happens while working it might be irritating for the customers but also for the person who is training since it might be hard to focus on the new information flow. Sometimes training might not even help the employees, it’s crucial for the people organizing trainings that the goals of training are clear and it’s possible to achieve them. (Gomez-Mejia, Balkin & Cardy 2016)

The difference between training and development is that training gives the employees skills which are required at work or help them do their job better. Where development means that it is mostly used to provide employees future abilities. Development has a wider focus, longer time frame and broader scope. (Gomez-Mejia, Balkin & Cardy 2016)

According to article in Explorance (Gruber 2018), an effective training program is built by following a systematic, step-by step process. The site states five different and necessary steps to implement effective training programs: 

• Asses training needs
• Set organizational training objectives
• Create training action plan
• Implement training initiatives
• Evaluate and revise training

Creating an effective development has three phases (Gomez-Mejia, Balkin & Cardy 2016), which are: 

• the assessment phase involves self-assessment and organizationally provided assessment. The goal of both of these types of assessment is to identify employees’ strengths and weaknesses. 
• the direction phase involves individual career counselling and information services
• the development phase is taking actions to create and increase skills to prepare for future job opportunities and is meant to foster this growth and self-improvement. Methods can be mentoring and coaching, job rotation and tuition assistance programs. 

SHRM (SHRM n.k.), the Society for Human Resource Management, states that the benefits of career development are that companies can differentiate themselves from labor market competitors, retain key workers, keep younger workers as well as decrease turnover after an economic downturn.

Case 1 & 2

McDonald’s is using gamification for training and developing their staff. The results of it were that they saved money in direct training costs. They also realized that learning has to be fun and engage the employees. Using the gamification is a great idea, but in a long run it might not have great results. It would be expensive to develop multiple different 3D-trainings, and to keep the employees attracted to this kind of method year after year.

Nando’s training and career developing strategy goes deeper. They are using the feeling of belonging to somewhat important and warm – family. It is proven that when people feel like they belong to somewhere, are appreciated and can affect to things, they feel better and work better. Nando’s has proven that with their award-winning coaching methods they have grown as a company, made more profits and their employees feel good at their work. Their employees really feel like developing themselves and staying within the company.

Companies committed to career growth

The team at RXBAR appreciates that the company values its employees just as much as it values its products. Because the founders of RXBAR recognize the importance of investing in their own people, the company has prioritized training and career development since day one. By maintaining a flat structure, RXBAR also creates opportunities for growth and collaboration across department lines. The roles and responsibilities of individual team members are meant to evolve and grow in tandem with the business. (Boogaard n.k.)

HP management is all about allowing employees to grow and learn at their own rate. They encourage each person to seek out and take advantage of any opportunities that interest them in order to gauge what their ultimate goals are for the future. In this way, managers help guide career paths that are right for each individual employee. (Boogaard n.k.)

References

Citation. 2006. “Nando’s tastes success through training: Expanding restaurant firm retains a family feel”, Human Resource Management International Digest, Vol. 14 No. 2, pp. 19-21

Boogaard, K. N.k. 16 companies committed to career growth. URL: https://www.themuse.com/advice/companies-committed-to-career-growth. Accessed: February 2, 2020

Gomez-Mejia, L.R., Balkin, D.B. and Cardy, R.L. 2016. Managing Human Resources. Global Edition 8/E. Pearson. London.

Gruber, G. 2018. 5 steps to creating effective training programs. URL: https://explorance.com/blog/5-steps-to-creating-effective-training-programs/. Accessed: February 2, 2020

Milne, J. 2016. Super-sized gamification for training – McDonald’s is lovin’ it. URL: https://diginomica.com/super-sized-gamification-for-training-mcdonalds-is-lovin-it. Accessed: February 2, 2020

SHRM – the Society of Human Resource Management. N.k. Developing employee career paths and ladders. URL: https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/developingemployeecareerpathsandladders.aspx. Accessed. February 2, 2020

Key concepts

Labor supply is the availability of workers who possess the required skills that an employer might need. Labor demand is the number of workers on organization needs. Estimating future labor supply and demand and taking steps to balance the two require planning. (Gomez-Mejia, Balkin & Cardy 2016)

Human resource planning (HRP) is the process an organization uses to ensure that it has the right amount and the right kinds of people to deliver a particular level of output or services in the future. (Gomez-Mejia, Balkin & Cardy 2016)

Ratio-Trends Analysis helps to calculate the ratios on the basis of past data. Firstly, it calculates the future ratios on the basis of the time series analysis/extrapolation, after making allowances for the changes in the organization, method, and jobs, if any. Extrapolation is mathematical extensions of past data into the future time period. Moving averages and exponential smoothing can help for projections. The company estimates the demand for human resources on the basis of ratios. (Toppr n.k.)

Hiring process consists of three activities: recruitment, selection and socialization. There are some common recruiting challenges that recruiters face daily. Here are few of them: attracting the right candidates, engaging qualified candidates, hiring fast, using data-driven recruitment, building a strong employer brand, ensuring a good candidate experience, recruiting fairly and creating an efficient recruiting process. (Bika n.k.)

Legal issues in staffing: discrimination laws, affirmative action and negligent hiring. (Gomez-Mejia, Balkin & Cardy 2016)

Case 1: What it was really like working as an Abercrombie model

In this very case there were several things which went wrong. First of all, there were clear issues of discrimination regarding to appearance and physics of the candidates. The candidate didn’t have a good experience about the recruitment process and felt it wasn’t professional at all. The manager who held the “interview” didn’t require any job applications or recommendations. They also didn’t do any proper interviews to check if the candidates were actually suitable for the job or if they had motivation for it. Summarizing the whole process, it was a good example how not to do recruitment process. In this very case the reputation of the whole company went down, which also affects to sales.

Other similar cases

Amazon makes use of monitoring technologies to track the movements and performance of its employees. In an investigative report by Financial Times correspondent Sarah O’Connor, she suggested that the company tags its employees with personal sat-nav computers that reveal the route they must travel to shelve goods, and sets target times for their warehouse journeys. Employees claimed that they were hired for 12 weeks before being sacked and re-employed so that the company did not have to give them the same rights as full-time staff members.(Schutte 2015)

According to Ryanair cabin crew, they are required to go on training courses with fees of up to 2000 pounds. If rejected during a probationary period, however, they are still forced to pay the sum – often leaving them with a hefty training bill. Furthermore, cabin crew must take three months unpaid leave a year and have to pay £360 for their uniform. They are also required to work a number of standby days each month whereby they must be available within one hour of being called. Its pilots don’t fare any better as they pay for all their own expenses, including uniforms, identity cards, transport and hotel accommodation. Their contracts bind them to fly exclusively for Ryanair as self-employed pilots. This means that they have no pension scheme or medical insurance unless they set it up themselves. (Schutte 2015)

References

Bika, N. N.k. The most common recruiting challenges and how to overcome them. URL: https://resources.workable.com/stories-and-insights/common-recruiting-challenges. Accessed: February 2, 2020

Cook, A. 2015. What it was really like working as an Abercrombie model. URL: https://www.huffpost.com/entry/what-it-was-really-like-working-as-an-abercrombie-model_b_7154042. Accessed: February 2, 2020

Gomez-Mejia, L.R., Balkin, D.B. and Cardy, R.L. 2016. Managing Human Resources. Global Edition 8/E. Pearson. London.

Schutte, S. 2015. The five best and worst companies to work for. URL: https://realbusiness.co.uk/the-five-best-and-worst-companies-to-work-for/. Accessed: February 2, 2020

Toppr. N.k. Human Resource Forecasting. URL: https://www.toppr.com/guides/business-management-and-entrpreneurship/human-resource-management/human-resource-forecasting/. Accessed: February 2, 2020