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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Human Resource Management


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Contents
1. Definition

Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Human Resource Management an Overview


2. The Functional Areas of Human Resource Management 3. Protagonists of HRM 4. The Organization of Human Resource Management 4.1 Human Resource Management in Small Businesses 4.2 Human Resource Management in Medium-Sized Firms 4.3 Human Resource Management in Large Firms 4.4 Outsourcing 4.5 Shared Service Center 5. The Internal and External Environment of Human Resource Management 6. Some Ins and Outs of HRM
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B. The Functional Areas of Human Resource Management Job Analysis


1. 2. 3. 4. Definition Job Analysis Methods Job Description Job Specification

Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Human Resource Planning


1. 2. 3. 4. 5. 6. Definition The Human Resource Planning Process Human Resource Forecasting Techniques The Quantitative Comparison of Requirements and Availability The Qualitative Comparison of Requirements and Availability Qualification Profil
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Fachhochschule Ludwigshafen am Rhein

Recruitment
1. 2. 3. 4. 5. 6. 7. 8. Definition Alternatives to Recruitment Environment of Recruitment The Recruitment Proces Recruitment Sources Recruitment Methods Internet Recruiting Selection 8.1 Definition 8.2 The Selection Process

Prof. Dr. Jutta Rump

Downsizing
1. Definition 2. Reasons for Downsizing
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Fachhochschule Ludwigshafen am Rhein

Compensation and Benefits


1. 2. 3.

Prof. Dr. Jutta Rump

4.

5.

6.

Definition Components of a Total Compensation Program Direct Financial Compensation 3.1 Equity in Direct Financial Compensation 3.2 Factors of Individual Direct Financial Compensation 3.3 Job Pricing 3.4 Executive Compensation Indirect Financial Compensation 4.1 Measures of Indirect Financial Compensation 4.2 Profit Sharing Nonfinancial Compensation 5.1 The Job as a Total Compensation Factor 5.2 The Job Environment as a Total Compensation Factor Cafeteria Compensation

Fachhochschule Ludwigshafen am Rhein

Human Resource Development


1. 2. 3. 4. 5.

Prof. Dr. Jutta Rump

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Introduction Definition of Human Resource Development The Purpose of HRD The Importance of Change Concerning HRD Training and Development 5.1 Definition 5.2 The Training and Development Process 5.3 Special Subjects of Training and Development 5.3.1 Management Development 5.3.2 Orientation 5.3.3 Vocational Training Career Planning and Career Development 6.1 Definition 6.2 Career Security / Employability

Fachhochschule Ludwigshafen am Rhein

6.3 6.4 6.5 6.6 6.7 6.8 6.9 7.

Factors Influencing Career Planning Career-Impacted Life Stages Individual Career Planning Organizational Career Planning Career Paths Career Development Career Planning and Development Methods

Prof. Dr. Jutta Rump

Performance Appraisal 7.1 Definition 7.2 Uses of Performance Appraisal 7.3 The Performance Appraisal Process 7.4 Appraisal Criteria 7.5 Responsibility for Appraisal 7.6 Requirements 7.7 Performance Appraisal Methods 7.8 Problems in Performance Appraisal
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

C. Strategic Human Resource Mangement


1. 2. 3. 4. 5. Definition Basic Strategic Trends Consequences The New HR Agenda HR Measurement

Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

D. International Human Resource Management


1. 2. 3. 4. 5. 6. Definition Classification of International Human Resource Management Targets The Difference between International Human Resource Management und Local Human Resource Management The Analysis of Intercountry Differences The International Dimension of the Functional Areas of HRM 6.1 International Assignments 6.2 International Staffing (Recruitment, Selection, Human Resource Development) 6.3 International Compensation
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

A. Human Resource Management - An Overview 10

Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

1. Definition
Human resource management deals with the availability of human resources and the efficiency of the personnel placement. There are several functional areas being associated with effective human resource management: - Job analysis - Human resource planning - Recruitment and selection - Human resource development - Compensation and benefits - Downsizing The main purpose of human resource management is to create and to keep the balance between the firms goals and the interests of the employees.
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Human resource management is part of every managers responsibility. The Human Resource manager und the human resource department assist all managers in many ways. During the last years the importance of HRM has changes: For many years it has been said that capital is the bottleneck for developing industry. I dont think this any longer holds true. I think it is the work force and the companys inability to recruit and to maintain a good work force that does constitute the bottleneck for production. I dont know of any mayor project backed by good ideas, vigor, and enthusiasm that has been stopped by a shortage of cash. I do know of industries whose growth has been partly stopped or hampered because they cant maintain an efficient and enthusiastic labor force, and I think this will hold true even more in the future. (G. Dressler (2003), S. 3)
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

2. The Functional Areas of Human Resource Management


Job analysis is the systematic process of determining the skills, duties and knowledge required for performing jobs in an organization. It impacts on human resource planning, recruitment, and human resource development. Human resource planning is the process of systematically reviewing human resource requirements to ensure that the required numbers of employees with the required skills are available when needed. Recruitment is the process of attracting qualified individuals and encouraging them to apply for work. Compensation and benefits provide employees with rewards for their contributions to meeting organizational goals. Downsizing is a process of reducing the numbers of employees.
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Human resource development is a major HRM function that consists not only training and development but also individual career planning, career development and performance appraisal. Training is designed to provide learners with knowledge and skills needed for their present job. Development involves learning that goes beyond todays job, it has a more long-term focus. Career planning is an ongoing process whereby an individual sets career goals and identifies the means to achieve them. Career development is a formal approach used by the organization to ensure that people with proper qualifications and experiences are available when needed. Through performance appraisal, employees are evaluated to determine how well they are performing their assigned tasks.
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

3. Protagonists of HRM
There are several protagonists performing human resource management tasks: The human resource manager The line manager The top management The workers council (especially in Germany)

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

The Human Resource Manager


Various classifications occur within the human resource profession. Human resource executive: An executive is a top-level manager who reports directly to the corporationss chief executive officer (CEO) or to the head of a major division. Human resource generalist: A generalist performs tasks in a variety of human resource-related areas. The generalist is involved in several or all human resource management functions. Human resource specialist: A specialist is typically concerned with only one of the functional areas of human resource management.

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

4. The Organization of Human Resource Management


The organization structure of human resource management depends often on the companys size. As firms grow and become more complex, the human resource functions also become more complex. The basic purpose of human resource management remains the same, the difference is in the approach which is used to accomplish its objectives.

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

4.1 Human Resource Management in Small Businesses


Small businesses seldom have a formal human resource unit and HRM specialists. The top management and the line managers handle human resource functions. Some aspects of human resource functions may actually be more significant in smaller firms than in larger ones. For example, a staffing mistake might be harmful and may cause the business to fail.
Manager / Owner

Sales

Operations

Finance
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

4.2 Human Resource Management in Medium-Sized Firms


As a firm grows a separate staff function may be required to coordinate human resource activities. In a medium-sized firm the person chosen to fill this role is expected to handle most of the human resource activities.

President

Sales Manager

Operations Manager

Finance Manager

Human Resource Manager

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

4.3 Human Resource Management in Large Firms


When the firmss human resource function becomes too complex for one person, separate sections are often created and placed under a human resource executive.
President

Vice President Marketing / Sales Manager HR Planning

Vice President Operations

Vice President Finance

Vice President Human Resource Manager Compensation / Benefits


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Manager Recruitment

Manager HRD

Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

4.4 Outsourcing
Outsourcing is the process of transfering the responsibility for an area of services and its objectives to an external provider. By outsourcing certain projects, companies can save time and resources and redirect their energy to more strategic issues.
Manager Human Resource

Executive Recruiting Outsourced

HR Recruitment

HR Development

Executive Development Outsourced


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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

4.5 Shared Service Center


A shared service center takes routine, transaction-based activities dispersed throughout the organization and consolidates them in one place. For example, a company with 20 business units could consolidate the routine HR tasks and perform them in one location.

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

5. The Internal and External Environment of Human Resource Management


Legal Considerations Society Economy Technology

Firms Mission and Policies

Corporate Culture

Management Style

Human Resource Management

Employees and their Capabilities and Attitudes Other Units of the Organization

Informal Organization

Formal Organization

Labor Market

Unions

Competition

Customers

Shareholder
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

6. Some Ins and Outs of HRM


Out: In: Out: In: Out: In: Out: In: Job titles and labels Everyone is a businessperson, an owner of a business process and a president of his / her job Chain of command Self-management, proactivity, personal responsibility, initiative Stability, order, structure better be safe than sorry Flux, disorder, risk, better be sorry than safe Good citizenship, wait for someone to decide your fate, work in the same organization for a long time Make a difference, learn from mistakes, change the employers, be flexible

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

B. The Functional Areas of Human Resource Management


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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Job Analysis

Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

1. Definition
Job analysis is the systematic process of determining a jobs duties and responsibilities, its relation to other jobs, skills and knowledge required and working conditions under which it is performed. A job consists of a group of tasks which make sure that the organization achieves its goals. A position is the collection of tasks and responsibilities performed by one person. There is a position for every person in an organization. Job analysis is used to prepare job descriptions and job specifications. The job description is a document that provides information regarding the task, duties and responsibilities of the job. The minimum acceptable qualifications that a person should possess in order to perform are listed in the job specification.

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Tasks

Responsibilities

Duties

HR Planning Recruitment Selection

Job Analysis

Job Description

Training and Development Performance Appraisal

Job Specification

Downsizing Compensation and Benefits

Knowledge

Skills

Abilities

...
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

2. Job Analysis
The purpose of job analysis is to obtain answers to six important questions: 1. 2. 3. 4. 5. 6. What physical and mental tasks does the worker accomplish? When is the job to be completed? Where is the job to be accomplished? How does the worker do the job? Why is the job done? What qualifications are needed to perform the job?

Job analysis is perfomed on three occasions: First, it is done when the organization is founded. Second, it is performed when a new job is created. Third, it is used when jobs are changed significantly as a result of new technologies, methods, procedures, or systems.
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Job Analysis Methods


There are several methods of job analysis: Questionaires Observation Interviews Employee recording Usually an analyst does not use one job analysis method exclusively. A combination of methods is often more appropriate. Regardless of the methods taken the analyst should learn as much as possible about the job. It is necessary that the supervisor introduces the analyst to the employees and explains the purpose of the job analysis. Trust and confidence ist an essential requirement for the process of job analysis.
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

3. Job Description
The job description is a document that provides information regarding the task, duties and responsibilities of the job. It has to be relevant and accurate. Components of the job description are - major duties performed, - percentage of time devoted to each duty, - performance standards to be achieved, - Working conditions and possible hazards, - supervision and subordination, - the machines and equipment used on the job.

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

4. Job Specification
The job specification is a document containing the minimum acceptable qualifications that a person should possess in order to perform a particular job. Items are requirements concerning skills, knowledge, abilities, experience ... Criteria are for example - knowledge of business - customer orientation - interpersonal skills / team player - ability to influence others - confidentiality - planing, organizing and time management - written and oral communication ...
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Human Resource Planning

Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

1. Definition
Human resource planning is the process of systematically reviewing human resoure requirements to ensure that the required numbers of employees with the required skills are available when and where they are needed. Human resource planning includes four factors: Quantity: How many employees do we need? Quality: Which skills, knowledge and abilities do we need? Space: Time: Where do we need the employees? When do we need the employees? How long do we need them?

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

2. The Human Resource Planning Process


Strategic Planning Human Resource Planning Forecasting Human Resource Requirements Demand = Supply No Action Comparing Requirements and Availability Surplus of workers Restricted Hiring, Reduced Hours, Early Retirement, Layoffs, Downsizing Forecasting Human Resource Availability Shortage of workers Recruitment Selection

Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

A requirement forecast is an estimate of the numbers and kinds of employees the organization will need at future dates in order to realize its goals. Before human resource requirements can be projected, the demand for the companys goods and services must be forecasted first. Forecasting requirements provide managers with the means of estimating how many and what types of employees will be required. Availability forecast is an estimate of the numbers and kinds of employees the organization will have got at future dates. The availability forecast is a process of considering incomings and outgoings during the planning period.

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

3. Human Resource Forecasting Techniques


Forecasting techniques include zero-base forecasting (zero-base forecasting is a method for estimating future employment needs using the organizations current level of employment as the starting point. Vacant positions are not automatically filled. The filling has to be justified.), the bottom-up approach (the bottom-up approach is a method beginning with the lowest organizational units. Each level forecasts ist requirements), the use of mathematical models, simulations.

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

4. Quantitative Comparison of Requirments and Availability


Availability in t0 + estimated incomings during the planning period - estimated outgoings during the planning period Availability in tx - Requirments in tx Balance Positive balance: Downsizing Negative balance: Recruitment and / or human resource development
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

5. Qualitative Comparison of Requirements and Availability


Available Qualifications Today In Future Required Skills, Knowledge and Abilities Today In Future

Requirements > Qualifications: Human resource development, job rotation, job reduction Requirements > Qualifications: Promotion, transfer, job enlargement, job enrichment, organization development
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

6. Qualification Profil
The qualification profil is a document containing qualifications which a person possesses. In order to check the aptitude the job specification and the qualification profil are compared.

What do we need What will we need

What do we have What will we have

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Recruitment

Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

1. Definition
Recruitment is the process of attracting individuals - just in time, - in sufficent numbers and - with appropriate qualifications and encouraging them to apply for jobs. Identifying productive sources of applicants and using suitable recruitments methods are essentials to maximize recruiting effectiveness and efficiency.

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

2. Alternatives to Recruitment
Even when human resource planning indicates a need for additional employees, a company may decide against increasing the size of its workforce. Alternatives to recruitment include outsourcing, contingent workers, employee leasing and overtime.

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

3. Environment of Recruitment

External environment
Labor Market Conditions - Quality - Quantity Legal Considerations Corporate Image

Internal environment
Human Resource Planning Promotion Policies: - Promotion from within - or a policy of filling positions from outside the organization The Firms Knowledge of Employees

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

4. The Recruitment Process


Human Resource Planning

Alternatives to Recruitment

Recruitment

Internal Sources Internal Methods

External Sources External Methods

Selection Recruited Individuals


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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

4.1 Recruitment Sources


Internal Recruitment Sources Employees
Normally internal recruitment takes priority over external recruitment. Exceptions are: - to fill entry-level jobs - to acquire skills not possessed by current employees - to obtain employees with different backgrounds to provide a diversity of ideas.

External Recruitment sources High Schools Vocational Schools Colleges and Universities Competitors and Other Firms The Unemployed Older Individuals Self-employed Workers

Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

4.2 Recruitment Methods


External Recruitment Methods Internal Recruitment Methods Job Posting: Job posting is a procedure for informing the employees that a job opening exists. Job Bidding: Job bidding is a technique that permits employees who believe that they possess the required qualifications to apply for a posted job. Advertising Private and Public Employment Agencies Executive Search Firms Job Fairs Internships Employee Referrals Event Recruiting Open Houses Sign-on Bonuses

Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

4.3 Internet Recruiting


The requirements for effective Internet recruiting are - to find Internet employment sites, - to establish a budget, - to develop an Internet Web site that is up-to-date and informative, - to write effective online ads, - to experiment with various advertising approaches, - to monitor both traditional and Internet advertisement, - to experiment with several Web sites and - become a sleuth on the Internet. In addition, do not neglect traditional recruiting methods.

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

4.4 Selection 4.4.1 Definition


The purpose of the selection is to identify and employ the bestqualified individuals. Selection is the process of choosing from a group of applicants the individual best suited for a particular position. There are several factors influencing the selection: Legal considerations Labor market conditions Type of organization (Private, governmental or not for profit) Speed of decision making Organizational hierarchy

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

4.4.2 The Selection Process

Preliminary Interview

Review of Applications

Selection Tests

Employment Interviews

New Employee

Physical Examination

Selection Decision

Reference and Background Checks

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

There are several preliminary interviews: - Telephone interview - Computer interview - Videotaped interview

Preliminary Interview

Review of Applications

Selection Tests

Employment Interviews

New Employee

Physical Examination

Selection Decision

Reference and Background Checks

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Fachhochschule Ludwigshafen am Rhein

An application should include - name, - address, - education, - work history, - certificates and - references.

Prof. Dr. Jutta Rump

Preliminary Interview

Review of Applications

Selection Tests

Employment Interviews

New Employee

Physical Examination

Selection Decision

Reference and Background Checks


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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Employment tests include cognitive aptitude tests, psychomotor abilities tests, job-knowledge tests, worksample tests, vocational interest tests, personality tests and drug and alcohol tests.

Preliminary Interview

Review of Applications

Selection Tests

Employment Interviews

New Employee

Physical Examination

Selection Decision

Reference and Background Checks


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Fachhochschule Ludwigshafen am Rhein

The employment interview is a goaloriented conversation in which interviewer and applicant exchange information.

Types of interviews are: - unstructured interviews, - structured interviews, - behavioral interviews

There are several methods of interviewing: one-on-one interview group interview board interview stress interview assessment center

Prof. Dr. Jutta Rump

Preliminary Interview

Review of Applications

Selection Tests

Employment Interviews

New Employee

Physical Examination

Selection Decision

Reference and Background Checks


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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Preliminary Interview

Review of Applications

Selection Tests

Employment Interviews

New Employee

Physical Examination

Selection Decision

Reference and Background Checks

Personal reference checks may provide additional information about the applicant and allow verification. An effective and comprehensive background investigation relates to the provious employment, education, personal references, criminal history, credit history ... 55

Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Preliminary Interview

Review of Applications

Selection Tests

Employment Interviews

New Employee

Physical Examination

Selection Decision

Reference and Background Checks

The selection decision is when the final choice is made from among those who are still in the race after the Interview information, reference checks, background investigations are evaluated. The individual with the best overall qualification may not be hired. The person whose qualifications most closely conform to the requirements should be selected.

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Preliminary Interview

Review of Applications

Selection Tests

Employment Interviews

New Employee

Physical Examination

Selection Decision

Reference and Background Checks

The physical examination must be directly relevant to the job requirements. The purpose of the physical examination is to determine whether the applicant is physically capable of performing the tasks.

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Preliminary Interview

Review of Applications

Selection Tests

Employment Interviews

New Employee

Physical Examination

Selection Decision

Reference and Background Checks

The selection results should be made known to both the successful and the unsuccessful candidates as soon as possible.
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Downsizing

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

1. Definition
Downsizing is the process of reducing the surplus of employees. If a surplus of employees is projected by the human resource planning, ways must be found to reduce the numbers of workers. There are several ways of downsizing: Restriced hiring Reduced hours Early retirement Non-prolongation of limited employment contracts Non-prolongation of leasing contracts Outplacement Layoffs
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Restriced hiring: When a firm implements a restricted hiring policy, it reduces the workforce by not replacing employees who leave. New workers are hired only when the overall performance may be affected. Reduced hours: Instead of working 40 hours a week, the management decides to cut each employees time to 30 or 20 hours. This cutback does not normally apply to the management level. Early retirement: Older employees (older than 58) have the possibility to retire at the age of 58 without substantial financial disadvantages. Outplacement: The employer helps the employee to find a new job. Layoffs: The employee is dismissed. He / she is no longer employed. Normally layoffs base on a combination of seniority, productivity and ability.
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

2. Reasons for Downsizing


Management Faults Reorganization Reengineering Rationalization and Optimalization Technical Progress Closing or Relocation Merger Change of Demands Ecomonic Trends ...
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Compensation and Benefits

Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

1. Definition
Compensation is the total of all rewards which employees get in return for their services. Direct financial compensation consists of the pay that a person receives in the form of wages, salary, bonuses and commissions. Indirect financial compensation (benefits) are all financial rewards that are not included in direct compensation. These are for example insurance and other programs for health, safety, security and general welfare. Nonfinancial compensation consists of the satisfaction that a person receives from the job itself or from the psychological and/or physical environment in which the person works.

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

2. Components of a Total Compensation Program


Compensation Financial Direct -Wages -Salaries -Commissions -Bonuses Indirect -Unemployment Insurance -Health Benefits -Pension Insurance Fund -Retirement Plans -Workers Compensation -Payment for Time Not Worked -Employee Services Nonfinancial The Job -Skill Variety -Task Identity -Task Significance -Autonomy -Feedback Job Environment -Sound Policies -Competent Employees -Congenial Coworkers -Appropriate Status Symbols -Comfortable Working Conditions -Workplace Flexibility 65

Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

3. Direct Financial Compensation

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

3.1 Equity in Direct Financial Compensation


Equity in the context of financial compensation means fair pay treatment for employees. A fair days work for a fair days pay. External equity exists when a firms employees are paid comparable to workers who perform similar job in other firms. Internal equity exists when employees are paid according to the relative value of their job within the same organization. Team equity exists when more productive teams are rewarded more than less productive teams.

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

3.2 Factors of Individual Direct Financial Compensation


The Organization

The Employee

Individual Financial Compensatio n

The Labor Market

The Job

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Organizational factors that should be considered include compensation policies, organizational politics and the ability to pay. This contains the decision to be a pay leader, pay follower or to strive for an average position in the labor market.
The Organization

The Employee

Individual Financial Compensatio n

The Labor Market

The Job
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Factors thatProf. Dr. Jutta Rump should be considered include - unemployment rate - wage and salary survey, - cost of living, - labor unions, - the economy and - labor law / employment legislation.
The Labor Market

Fachhochschule Ludwigshafen am Rhein

The Organization

The Employee

Individual Financial Compensatio n

The Job
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Fachhochschule Ludwigshafen am Rhein

The Organization

Prof. Dr. Jutta Rump

The Employee

Individual Financial Compensation

The Labor Market

The Job

The organization pays for the value it attaches to certain duties, responsibilities and other job-related factors. Management techniques utilized for determining a jobs relative worth include job analysis, job description and job evaluation.
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

The factors related to the employee include performance-based pay (merit pay, variable pay, skill-based pay, competency-based pay), seniority, experience, membership in the organization, potential, political influence...

The Organization

The Employee

Individual Financial Compensation

The Labor Market

The Job
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

3.3 Job Pricing


Placing a monetary value on the worth of a job is called job pricing. It takes place after the job has been evaluated and the relative value of each job in the organization has been determined. Firms often use pay grades and pay ranges in the job pricing process.

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

3.4 Executive Compensation


In determining executive compensation, firms typically prefer to relate salary growth for the highest-level managers to overall corporate performance, including the firms market value. For the next management tier, they tend to integrate overall corporate performance with market rates and internal considerations to come up with appropriate pay. For lower-level managers, salaries are often determined on the basis of market rates, internal pay relationship and indivdiual performance. In general the higher the managerial position, the greater the flexibility managers have in designing their jobs. Executive compensation often has several elements: - Base salary - Short-term incentives or bonuses - Long-term incentives and capital appreciation - Perquisites (perks)
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

4. Indirect Financial Compensation

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

4.1 Measures of Indirect Financial Compensation


Unemployment insurance: If employees lose their jobs, they receive an unemployment compensation which depends on their last salaries / wages and on the length of continuous employment. Health benefits: Heath benefits include health care, dental care and sometimes vision care. Pension insurance fund: In Germany every employee has to pay a percentage in statutory pension insurance fund. At the age of 65 he / she gets the retirement benefits. Retirement plans: The employee pays voluntarily a part of his income in a retirement or savings fund. At the age of 60 or 65 he or she gets an amount of retirement income which depends on the investment success.

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Disability insurance: The disability insurance protects employees against loss of earnings resulting from total disability. Workers compensation: This benefit provides a degree of financial protection for employees who incur expenses resulting from jobrelated accidents or illnesses. Payment for time not worked: This includes rest periods, coffee breaks, lunch periods, cleanup time, travel time, paid vacations, sick pay, military duty, civic duties, bereavement time... Employee services: Employee services are relocation benefits, child care, educational assistance, food servies and financial services ( for example loans)

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

4.2 Profit Sharing


Profit sharing is a compensation plan that results in the distribution of a predetermined percentage of the firms profits to employees. Many companies use this type of compensations plans to integrate the employees interests with those of the firm. Gain sharing is a special form of profit sharing. Gain sharing plans are designed to bind employees to the firms performance by providing an incentive payment based on the improved company performance. Improved performance can take the form of increased productivity, increased customer satisfaction, lower costs...

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

5. Nonfinancial Compensation

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Fachhochschule Ludwigshafen am Rhein

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5.1 The Job as a Total Compensation Factor


Some jobs can be so exciting, that the employee can hardly wait to get to work each day. A person in this type of job would not swap his or her employment with anyone in the world. Most of us spend a large part of our lives not on the beach, but working. When work is a drag, life may not be very pleasant. In order to achieve motivation by the job, the job has to contain five dimensions: - Skill variety - Task identity - Task significance - Autonomy - Feedback
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5.2 The Job Environment as a Total Compensation Factor


Employees can draw satisfaction not only from their work but also from the job environment. The job environment includes working atmosphere and congenial co-workers, competent employees, appropriate status symbols and working conditions.

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Working conditions achieve satisfaction and motivation especially when workplace flexibility exists. Workplace flexibility is a key factor in attracting and retaining talented and qualified employees. Programs of workplace flexibility include flextime, a compressed workweek, job sharing, telecommuting, part-time work, modified retirement.

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6. Cafeteria Compensation
Cafeteria compensation plans permit flexibility in allowing each employee to determine the compensation package which best satisfies his or her particular needs. The rationale behind the cafeteria plans is that employees have individual needs and preferences.

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Human Resource Development

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1. Introduction
In every market customers are demanding higher quality, lower costs, and faster cycle times. To meet these requirements, firms must continuously improve their overall performance. Rapide advances in technology and improved processes have been important factors in helping businesses. However, the most important competitive advantage is the workforce and especially the competency, knowledge and skills. The function / functional area dealing with competency, knowledge and skills is Human Resource Development.

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2. Definition of Human Resource Development (HRD)

Prof. Dr. Jutta Rump

Improved performance is the buttom-line purpose of HRD. HRD is a major HRM function that consists not only training and development but also individual career planning, career development and performance appraisal. Training is designed to provide learners with knowledge and skills needed for their present job. Development involves learning that goes beyond todays job, it has a more long-term focus. Career planning is an ongoing process whereby the individual sets career goals and identifies the means to achieve them. Career development is a formal approach used by the organization to ensure that people with proper qualifications and experiences are available when needed. Through performance appraisal, employees are evaluated to determine how well they are performing their assigned tasks.
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Fachhochschule Ludwigshafen am Rhein

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3. The Purpose of HRD


Availability of qualified employees Development of knowledge, skills and experience Promotion of prospective managers and talented young employees Improvement of leadership Enhancement of motivation Guarantee of employability Decrease of fluctuation rate Increase of flexibility ...

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

4. The Importance of Change concerning HRD


Another basic purpose of HRD is to anticipate change and to respond proacticely to it. The most prominent changes affecting HRD are the following: Changes in organization structure caused by mergers, acquisitions, rapid growth, downsizing, and outsourcing. Changes in technology and the need for more highly skilled workers. Changes in educational level of employees. Changes in human resources, creating a diverse workforce consisting of many groups. Competitive pressures necessitating flexible courses and just-in-time and just-whats-needed training. Increased emphasis on learning organizations and human performance management.

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5. Training and Development

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5.1 Definition

Prof. Dr. Jutta Rump

Training is designed to provide learners with knowledge and skills needed for their present job. Development involves learning that goes beyond todays job, it has a more long-term focus. It prepares employees to keep pace with the organization as it changes. Training and development acitivities have the potential to align employees of a company with its corporate strategies.

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Prof. Dr. Jutta Rump

5.2 The Training and Development Process


External Environment Internal Environment 1. Determining T&D Needs 2. Establishing Specific Objectives 3. Selecting T&D Methods

5. Evaluating T&D Programs 4. Implementing T&D Programs

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Determining Training and Development Needs


T&D needs may be determined by conducting analyses on several levels. From overall organizational perspective, the firms strategic mission, goals, and corporate plans should be studied, along with the results of human resource planning. The next level of analysis focuses on the tasks that must be accomplished in order to achieve the firms purposes. Job descriptions, performances appraisals and interviews or surveys of supervisors and job incumbents are important data sources for this analysis level. Finally, individual training needs must be addressed. The relevant questions are Who needs to be trained? and What kind of training is needed?

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Prof. Dr. Jutta Rump

Establishing Training and Development Objectives


T&D objectives are necessary. Without them, designing meaningful T&D programs would not be possible. T&D objectives are indepted to several standards. These standards are - handling, - precision and - measurability. Besides T&D objectives have three dimensions: - Content - Direction and - Time
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Selecting Training and Development Methods


Training-on-the-Job
- Learning by Experience (learning job tasks by actually performing) - Job Rotation - Job Enlargement - Job Enrichment - Computer-Based Training - Web-Based Training - Teamwork - Substitution - Coaching - Mentoring - Internship

Training-off-the-Job
-Business Games - Case Study - Videotapes - In-Basket Training - Role Playing - Distance Learning and Videoconferencing - Classroom Programs - Simulators - Quality Circle - Work Groups

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Prof. Dr. Jutta Rump

Implementing Training and Development Programs


Implementing T&D programs is often difficult. 1. 2. 3. 4. 5. Many managers are action oriented and feel that they are too busy for T&D. Qualified trainers must be available. Training implies change which employees may resist. The content and the methods of T&D must relate to the work requirements and to the career planning. Another difficulty in implementing T&D programs is record keeping. Records inform how well he or she performs during the training and on the job.

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Evaluation Training and Development


The credibility of T&D can be enhanced if the tangible benefits to the organization can be shown. There are several approaches in order to determine the valuable service and the value added. - Participants opinions - Extent of learning - Behavioral change - Accomplishment of T&D objectives - Application at the workplace - Feedback of immediate supervisors and collegues - Benchmarking

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Prof. Dr. Jutta Rump

5.3 Special Subjects of Training and Development


Management Development Orientation Vocational Training

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

5.3.1 Management Development Definition


Management development consists of all learning experiences provided by an organization for the purpose of upgrading skills and knowledge required in current and future managerial positions and leadership roles. If critical knowledge and skills are provided by organizations in develoment programs, the process will require personal commitment of the individual manager / leader. In fact, taking responsibility for ones own development may be the most important aspect.

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The Adjustment of Management Development


Management development can be offered in-house or outside the company.
The most frequently mentioned reasons for keeping management training inside the company are the following: - Consideration of company requirements and needs - Lower costs - Less time - More control of content and procedure The most frequently mentioned reasons to conduct management training outside the company are the following: - An outside perspective - New viewpoints - Exposure to experts and research - Broader vision

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Special Training Areas


Management development often deals with - leadership - diversity, - customer service, - conflict resolution, - values, - teamwork, - empowerment, - remedical training.

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5.3.2 Orientation Definition


First impressions are the most lasting. Because of this, many companies have orientation programs for new employees. Orientation wants to inform new employees about the company (products, benefits, policies, procedures, organizational structure, corporate culture), the job and the work group. To perform effectively und efficiently, they need information which allows them to do their jobs and helps them to understand their co-workers behavior. Orientation is effective in retaining and motivating personnel.

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Purposes of Orientation

Orientation acquaints employees with - the employment situation (the job, department ...), - company policies and rules, - compensation and benefits, - corporate culture. Orientation influences - the socialization, - team membership, - dealing with change.

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5.3.3 Vocational Training Definition


Vocational training is the first systematical training of occupational skills and competence. It is based on special laws. In Germany firms and schools ( especially vocational training schools) are responsible for the vocational training. This is called the dual system of vocational training. The firms are responsible for the practical training and the vocational training schools impart comprehensive skills and general knowledge.

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Advantages und Disadvantages of the Dual System


Advantages Vocational Training is close to reality Learning by doing Integration the apprentices in production operations Disadvantages Risk of conflicts between production objectives and training goals No cooperations between instructors and teachers Out-dated curricula and antiquated training plans
(this refers especially to the vocational schools)

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Implementing the Vocational Training


Methodical approach (job instruction, discussions, work in projects, team work, junior firms, computer-based training, visits ...) Time management (period of vocational training, reduction of the apprenticeship, time sharing between firm and school ...) Space management (apprentices shop, employment in the functional departments ...)

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The Holistic Vocational Training


Many firms aim at the holistic vocational training. The holistic vocational training contains - skills and knowledge (this is the traditional way of vocational training), - methodical and social qualifications. The employees should learn the capability to act. In this case they become more flexible and are able to take over many different jobs. The capability to act includes the following components: - The employee knows what to do. - He / she knows the work process. - He / she knows the objectives which relate to the job. - He / she knows the players and the relations / connections between them.

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Prof. Dr. Jutta Rump

6. Career Planning and Career Development

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6.1 Definition
A career is a general course that a person chooses to pursue throughtout his or her working life. Career planning is an ongoing process whereby an individual sets career goals and identifies the means to achieve them. The major focus of career planning should be on matching personal goals with opportunities that are realistically available. In organizational career planning, the organization identifies paths and activities for indvidual employees as they develop. Organizational career planning is necessary to help ensure that a firm improves its abilitiy to perform by identifiying needed capabilities and the type of people needed to perform in an ever-evolving business environment. Career development is a formal approach used by the organization to help people acquire the skills and experiences needed to perform current and future jobs. Career development is important to maintain a motivated and committed workforce.
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6.2 Career Security / Employability


For many employees career planning involves planning ways to improve their career security as opposed to ensuring job security within the organization. Fewer and fewer companies offer real job security by protecting employees against job loss. Instead of job security, employees strive for career security. Career security is the development of marketable skills and expertise that help ensure employment within a range of career. Career security is different from job security in the way that job security implies security in one job, often with one company. With career security employees are offered opportunities to improve their skills in an ever-changing work-environment. Under this so-called employability doctrine, employees owe the company their commitment while on board and the company owes ist workers the opportunity to learn new skills.
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6.3 Factors Influencing Career Planning


There are several factors which infuence a persons view of a career. Two major factors affect career planning: Career-impacted life stages: The main life stages of career cycle include growth, exploration, establishment, maintenance and decline. Career anchors: The career anchors are managerial competence, functional competence, security, creativity, autonomy and independence, and technical competence.

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6.4 Career-Impacted Life Stages


Stage 3 Stage 4 Stage 5

Stage 1

Stage 2

Growth Growth

Exploration Exploration

Establishment Establishment

MaintenMaintenance ance

Decline Decline

From birth to age 14

From 15 to 24

From 25 to 44 Finding a suitable occupation; engaging in those activities that help establish a career

Developing a Developing realistic undera selfstanding of concept abilities and talents

Between the age of 45 and 64 Making an effort to maintain and to push the career

Losing power and responsibility; preparing for retirement

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6.5 Individual Career Planning


Through career planning, a person continuously evaluates his or her abilities and interests, considers alternative career opportunities, estblishes career goals, and plans practical development activities. Individual career planning must begin with self-understanding or selfassessment. Then, the person is in a position to establish realistic goals and to determine what to do to achieve these goals. Self-assessment means learning about oneself. Some useful tools are - a strength/weakness balance sheet and - a likes and dislikes survey Getting to know oneself is not an singular event. Self-assessment should be viewed as a continuous process.

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6.6 Organizational Career Planning


In organizational career planning, the organization identifies paths and activities for indvidual employees as they develop. Management observes the employees performence and compares it with the job standards. Strength and weakness are noted, enabling management to assist the employee in making a tentative career decision. This tentative career decision is based on a number of factors, including personal needs, abilities and aspirations, and the organizations needs. Although the primary responsibility for career planning rests with the individual, organizational career planning must run closely parallel to individual career planning if a firm is to retain its best and brightest employees. Workers have to see that the companys organizational career planning effort is directed toward furthering their specific career objectives.
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6.7 Career Paths


A career path is a flexible line of movement through which an employee may move during employment with a company. There are several career paths: Traditional career path Network career path Lateral career path Dual career path Adding value to the career / employability doctrine Demotion

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6.8 Career Development


Career development is a formal approach taken by the organization to ensure that people with proper qualifications and experiences are available when needed. Career development relates to skills, knowledge and experiences as well as behavioral modifications that allow individuals to work better and add values. Career development benefits both: the organization and the employee. The tools of career development are similar to those discripted in chapter Training and Development The employees immediate supervisor is responsible for providing support, advice and feedback.

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6.9 Career Planning and Development Methods


There are numerous methods for career planning and development: - Discussions with knowledgeable individuals - Company materials for example job descriptions - Performance appraisal - Workshops - Self-assessment and personal development plans - Software packages and career planning web sites - Inquiry of the corporate policies, objectives and strategies

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7. Performance Appraisal

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7.1 Definition
Performance appraisal is a system which reviews and evaluates an individuals or teamss job performance. Besides an effective system should evaluate accomplishments, should develop plans for the individual and the team and should assess employee potential. The primary goal of performance appraisal is to improve performance.

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7.2 Uses of Performance Appraisal


Performance appraisal data can be used in several human resource functions. It is the information base for - human resource planning, - recruitment and selelection, - training and development, - career planning and development, - compensation programs, - internal employee relations.

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7.3 The Performance Appraisal Process

Stage 1 Stage 1

Stage 2 Stage 2

Stage 3 Stage 3

Stage 4 Stage 4

Stage 5 Stage 5

Identifying specific performance appraisal goals

Establishing job expectations / job analysis

Examining work performed

Appraising performance

Discussing appraisal with the employee

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7.4 Appraisal Criteria

In practice the most common appraisal critiera are qualifications, traits (attitude, appearance, initiative...), behaviors (leadership style, teamwork, cooperation, customer service orientation...), task outcomes, improvement potential.

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7.5 Responsibility for Appraisal


In many companies the human resource department is responsible for developing and implementing performance appraisal programs. It is essential that line managers play a key role from beginning to end. They must directly participate in the program as designer and user. There are severals possibilities in carrying responsibility for rating: Evaluation of the employees by their supervisors Evaluation of managers by subordinates Peer evaluation Self-appraisal Evaluation by the customers
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7.6 Requirements
An effective performance appraisal requires the following factors: Job-related criteria Performance expectations Standardization Documentation Trained appraisers Continuous open communication Due process

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7.7 Performance Appraisal Methods


There are several performance appraisal methods: - Appraisal interview - Rating scales - Critical incidents method - Behaviorally anchored rating scales - Essay method - Works standards method - Ranking method - Paired comparison - Forced distribution method - Assessment center - The 360-degree feedback

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7.8 Problems in Performance Appraisal


The problems associated with performance appraisal include -the lack of objectivity, - halo error, - leniency, - strictness, - central tendency, - recent behavior bias, - personal bias, - manipulation of evaluation.

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C. Strategic Human Resource Management

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1. Definition
A strategy is the conpanys long-term plan for how it will balance its internal strengths and weaknesses with its external opportunities and threats to maintain a competitive advantage. (Based on the SWAT analysis) Strategy was traditionally a job mostly for the firms top operating (line) managers. Thus, the president and his or her staff might decide to enter new markets, drop product lines, or embark on a five-year cost cutting plan. Then he or she would more or less leave personnel implications of that plan for the human resource management to carry out. Today, HR usually plays a more central role. More and more it is the firms workforce its knowledge, commitment, skills, and training that provides the competitive advantage for world-class companies. That means an upgrading of the HRM.
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Today, HRs role is shifting from protector and screener to strategic partner and change agent. The focus is on the strategic contribution of HRM. Strategic human resource management links the human resource management with the strategic goals and objectives in order to improve business performance and develop organizational cultures that foster innovation and flexibility. Ideally HR and top management together craft the companys business strategy. That strategy then provides the framework that guides the design of specific HR activities. This should produce the employee competencies and behaviors that in turn should help the business implement its business strategy and realize its goals.

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HR strategies are the cources of action HR uses to help the company achieve its strategic aims. Example: A HR strategy could be building a committed workforce by creating a two-way communication, by offering competitive salaries and incentives, by making career planning HRs role as a strategic partner: HRM becomes an equal partner in both the formulation and the implementation of the companys strategies.

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2. Basic Strategic Trends


If HRM becomes a strategic partner, it will be important to make the SWAT analysis which stands for strengths, weaknesses, opportunities and threats. In a strategic process managers are forever forcing the strengths and working on the weaknesses and they are forever scanning the environment for opportunities and threats. There are several basic trends that are important in determining the strategic direction of most firms today and in future. - Globalization - Technological advances - The increasing importance of knowledge and human capital - The demografic development - The change in society
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Globalization
Many companies market all over the world. Firms are globalizing their production, too, by putting facilities where they are most advantageous. The bottom line is that the growing integration of the world economy into a single, huge marketplace is increasing the intensity of competition in a wide range of manufacturing and service industries. Deregulation has reinforced this trend, as nations eliminate the legal barriers that protect industries. More globalization means competition, and more competition means more pressure to improve to find new ways to do things better and less expensive.

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Technological Advances

Prof. Dr. Jutta Rump

It has been estimated that there will be more technological change in the next 50 years than in the last 1000 years. The world has never before seen technological changes occur as rapidly as they are presently happening in the computer and telecommunications industries. One estimate is that technological changes are coming so fast that a person may have to change his or her entire skill repertoire five or six times in a career. Increasing importance of IT and communication technologies in companies has the following effects: IT and CT accelerate the speed of change. IT and CT are resonsible for a lot of rationalization and efficiency measures, especially in the low-qualified job sector. IT an CT are responsible for the increasing complexity in process and workplace. The requirements are changing: High qualified people should be available. This includes not only technical knowledge but also skills (like flexibility, mobility, capability to adapt and to reflect ) 132

Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

The Increasing Importance of Knowledge and Human Capital


Technology is doing more than reducing costs and opening up new ways to compete: it is also changing the nature of work. In addition there is a continuing shift fom manufactoring jobs to service jobs. Today more than 60 % of German workforce / U.S. workforce / British workforce is working in the service sector. If we take the support processes in the manufacturing sektor into consideration, almost 80% of the workforce is employed in developing, producing and delivering services. Because of the technological development and the increasing complexity the requirements change. Many service jobs require now knowledge workers.
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Prof. Dr. Jutta Rump

The Demografic Development


We are living in an decreasing society. Today 20% of the European population is younger than 20 years, 17% of the population is older than 65 years. In 2030 (retirement boundary of the baby boomer generation) 17% of the polulation will be under 20, 27% will be older than 65. In 2050 16% of the population will be younger than 20 and 37% will be older than 65. The labor force is also getting older. Today the median age of labor force is 38 years. It is projected to rise to 52 in the year 2050. The average age of workforce will rise from 40,5 years today to 55 years in 2050. The main factor influencing this demografic development is the low reproduction rate / fertility rate: The fertility rate in Germany is more or less constant 1.3 since 1975. To have a society in balance the fertility rate must be 2.1.
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Prof. Dr. Jutta Rump

The Change in Society


The baby-boomer generation and the after-war generation have special values which influence their attitude towards work. On the one hand they strive for performance and career, on the other hand they look for stability. The generation X (born between 1965 and 1975) and the generation y (born after 1975) are looking for a balance between fun and performance and career, between work and life, between fexibility and stability. Many concepts and instruments used in HRM are based on the values of the older generation. Considering the values of the younger generation there is a potential for conflicts.

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3. Consequences
Trends influence the way firms are managed. They are responsible for new strategic concepts or modified concepts in HRM: Knowledge management Diversity management Employability management Complexity management Organizational learning Creating commitment New leadership models International HRM
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Prof. Dr. Jutta Rump

4. The New HR Agenda


In order to consider the trends and the challenges, HR should not only be involved in the business at a strategic level. In addition there are other domains of HR competencies. The competencies for the new HR are: - Strategic contribution - Personal credibility - HR delivery - Business knowledge - HR technology

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Personal Credibility
- Interpersonal skills - Getting results - Communication

Strategic Contribution
- Culture management - Fast change - Strategic decision making - Market driven connectivity

HR Delivery
- Staffing - Learning - Organizational design - Performance management - HR measurement

H R T e c h

Business Knowledge
- Understanding of the business and industry of the company - Understanding of the integrated value chain and the firms value proposition

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5. HR Measurement

HR Measurement Quantitativoriented Approach


- Evaluation of the Costs - Return on Knowledge - Indicator Model - Balanced Scorecard

Qualitativ-oriented Approach
- Portfolio Analysis - Competence Check

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D. International Human Resource Management

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1. Definition
International in this context means that relations between company units in (two or several) different countries exist. An international company is defined as an institution that is active at least in two national economies, and/or follows business activities beyond national boundaries.

The most important aspect in international human resource management is the cross-borderd orientation. This relates to the functional areas and to the processes.

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2. Classification of International Human Resource Managements


Staff Category (PCN, HCN, TCN)
Functional Areas (HR Planning, Recruitment, Selection, HR Development, Compensation and Benefits, Leadership...)
ent (par ry, t coun ountry, c host ountry) c third

s ntrie ou

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3. Targets

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Prof. Dr. Jutta Rump

... Concerning an International Orientation


Increase of profit Increase of sales by activities from abroad Diversification of risks Achieving competition advantages Reaction to the success of competitors abroad Use of national subsidies Securing the business relationship to partners, which move production abroad Gaining knowledge, Know-how transfer and Development of competence Considering currency relations
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Concerning International Human Resource Management

Prof. Dr. Jutta Rump

availability of human resources and the efficiency of the personnel placement in the national und international context Identification of critical HR factors influencing success Improving the relationship within the company and over the boundaries Considering different thinking and action patterns Creating a learning culture which is characterized by openness and tolerance Support of the transnational know-how transfer Increasing the mobility and the motivation to change Developing cross-cultural empathy Considering different economic, political, social and cultural conditions ... 144

4. The Difference between International Human Resource Management and Local Human Resource Management

Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

An international company deals with an increased complexity and an increased uncertainty. There are several reasons:
The numbers and the heterogeneity of the elements influencing the process of decision making increase. At the same time the transparency decreases. If the degree of strangeness increases, the identification of interdependences will become more and more difficult. Environmental elements and conditions are different from country to country. This makes a specific, case-referred procedure necessary. Economic, political and social differences hinder a standardized procedure. The linguistic variety affects the communication and influences the cooperation. Cross-cultural differences determine the thinking and behavior pattern. Prejudices influence the relationship.
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The international human resource management differs from the human resource management on the local level by the following factors: Increased numbers of activities (e.g. international taxation, foreign delegations, services for expatriates, language translation services...) Global perspective Considering the privacy of the (potential) expatriates Larger risks Considering different economic, political, sozial and cultural conditions Equal treatment of the different nationalities
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5. The Analysis of Intercountry Differences


Before we are able to develop and implement a successful human resource management, we should focus on the environment (cultural factors, legal considerations, political standards etc.) and we should consider the corporate policy of internationalization.

External perspective: Environmental scanning Crosscultural Scanning

Internal perspective: Corporate policy of internationalization


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Environmental Scanning: The Model of Environment


Tasks, working conditions Tasks, working conditions

Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

(Dfler, E. (1997), S. 261)

employee employee company company

political standards, laws political standards, laws

culture (manmade)

social relations social relations culturally based values culturally based values status of the reality recognition and technology status of the reality recognition and technology

nature

natural conditions natural conditions

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Cross-cultural Perspective: The Hofstede Model

Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

A study by Geert Hofstede identifies international cultural differences. Hofstede says that societies differ in several dimensions: Power distance: The dimension power distance describes whether and how people accept the unequal distribution of power. Avoiding incertainty: The dimension avoiding uncertainty describes whether and how people accept uncertain situations. Feminism versus masculism: The dimension feminism describes the importance of soft facts in the working context, like leadership, cooperation, colleagues The dimension masculism describes the importance of hart facts in the working context, like salary, promotion, challenges Individualism versus collectivism: The dimension individualism describes the importance of self-responsibility and inititative. The dimension collecitivsm describes the importance of a strict, well-definied network.
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Collecitivsm

Individualism

27
Low Power Distance

48

70
High Power Distance

91

11

34

58

81

104

Accepting Uncertainty

Avoiding Uncertainty

34
Feminism

60

86
Masculism

112

28

50

72

95
150

Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Country Germany USA Great Britain France Italy Japan South Africa Brasil Australia

Power Distance 35 40 35 68 50 54 49 69 36

Individualism 67 91 89 71 76 46 65 38 90

Masculism 66 62 66 43 70 95 63 49 61

Dealing with Uncertainty 65 46 35 86 75 92 49 76 51


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Prof. Dr. Jutta Rump

The Corporate Policy of Internationalization


There are several corporate policies of internationalization: - The ethnocentric policy. - The polycentric policy. - The geocentric policy. These policies represent the company`s attitude concerning the international business activities. In addition they depend often on the development level of the international acivities. At the beginning of internationalization many companies prefer the ethnocentric policy. After some years they establish the polycentric policy. If a company becomes a global player with many subsidiaries all over the world, it will implement the geocentric policy.
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The Ethnocentric Policy


In an ethnocentrically run company the prevailing attitude is that home country attitudes, management style, knowledge, evaluation criteria, and managers are superior to anything the host country might have to offer. Strategic decisions are made by the parent company. With an ethnocentric policy, the firm fills key management jobs with PCNs. Reasons given for ethnocentric policy include the lack of qualified host-country senior-management talent, a desire to maintain a unified corporate culture and tighter control, and the desire to transfer the parent firms core competencies to a foreign subsidiary more expeditiously. The disadvantages are the costs and the demotivation of the HCNs.
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The Polycentric Policy


In the polycentric company there is a conscious belief that only HCNs can ever really unterstand the culture and the behavior of the host country market. Every subsidiary is more or less independent. It has the autonomy and the competence to make decisions. Therefore, the foreign subsidiary should be managed by local people. A polycentric-oriented firm would staff its foreign subsidiaries with HCNs, and its home office with PCNs. This may reduce the local cultural misunderstandings. It is also less expensive. Another reason is that many people do not want to work in a foreign country. The disadvantages are the missing connections to the parent company, and the lack of control.

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The Geocentric Policy


Geocentric executives believe that they must scour the firms whole management staff on global basis, on the assumption that the best manager of a specific position anywhere may be in any of the countries in which the firm operates. That means: A geocentric policy seeks the best people for key jobs throughout the organization, regardless of nationality. This may let the global company use its human resources more efficiently by transferring the best person to the open job, wherever he or she may be. It also help build stronger and more consistent culture and set of values among the entire global management team. In a geocentric way of international management, decisions are made by the ajustment between parent company and subsidiaries. The main purpose is to achieve a high global efficiency all over the company.
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Prof. Dr. Jutta Rump

6. The International Dimension of the Functional Areas of HRM


A company operating multiple units abroad is not blessed with homogeneity. Instead it is confronted with complexity and uncertainty. Concerning HRM: In a multinational company the functional areas of HRM have to be supplemented by international components. The important functional areas of the international HRM are: International assignments. International staffing (recruitment, selection and human resource development). International compensation.

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

6.1 International Assignments


Definition
An international assignment is defined as staying abroad for a period of time in subsidiaries. International assignments are the heart of international HRM. Expatriates are noncitizens of countries in which they are working. Locals are citizens of the countries where are they are working.

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Targets concerning International Assignments


Targets of a multinational company:
Know-how transfer Transfer of the parent firms core competencies Creating an international cadre of managers International assignments as a part of the career planning and career development Removal of a lack of qualified hostcountry managers / local expertise not available Developing a cross-cultural awareness Maintaining a unified corporate culture Maintaining a tighter control and a better coordination of global policy Creating an unified communication policy

Prof. Dr. Jutta Rump

Individual targets
Improving the chances on the labor market Desire to get new tasks and new challenges Getting more money Desire to know another country and another culture Beginning a new life / international assignment as a way to solve personal problems

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Different Types of International Assignments


Expatriate assignments: Expatriate assignments are long-term assignments where the employees and typically their partner / family, if they have one, move to the host country for a specified period of time, more than one year. Short-term assignments: Short-term assignments are those with a specified duration, usually less than one year. The family may or may not accompany the employee. International commuting: International commuting involves an employee transiting regularly from his/her home country to a place of work in a specified other country, usually on a weekly or biweekly basis, while the family remains at home. Frequent flyers: Frequent flyers are those employees that undertake frequent international business trips but do not relocate.
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Fachhochschule Ludwigshafen am Rhein

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Problems of International Assignments


International assignments are the heart of international HRM, and it is therefore disconcerting to see how often such assignments fail. Assignments that end early range from 20% to 50%, and the direct costs of each such failure can reach hundreds of thousands of Euro. Why do international assignmenets fail? Reasons are: Personality Lack of cross-cultural empathy The family (inability of the spouse to adjust, dual career couples, learning a new language, finding new friends, attending new schools) The expatriate selections are made by line managers based on technical competence. They fail because of the family and personal issues and lack of cultural skills that have not been part of the process.

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Prof. Dr. Jutta Rump

Lack of work-life balance Stress, burnout and travel fatigue feature in relation to international commuting and frequent flyer assignments Fear to be out of sight, out of mind: The firm has promoted the expatriates colleagues while he / she was abroad Problems with the language The socio-cultural and economical conditions in the host country Political instability Climate One way to reduce assignment problems is simply to shorten the length of the assignment. A second way to reduce assignment problem is to provide realistic previews of what to expect, careful screening, improved orientation, and improved benefits packages.
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

The Process of International Assignements

Managering Mobility / Selection

Orienting / Training

Staying Abroad

Repatriation

Expectation Culture Shock Adjustment


Control

Repatriation

Reverse Culture Shock

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Prof. Dr. Jutta Rump

Managing Mobility
There are several possibilities to motivate employees in order to go abroad: A clear commitment and an agreement for the time after the international assignments Reentry-garanty The necessity of international assignments for the career development Financial incentives and nonfinancial benefits Considering the family Information about the conditions in the host country, about schools etc.
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Selecting

Prof. Dr. Jutta Rump

There are five factors that contribute to success in international assignments: Job knowledge Job motivation Relational skills Flexibility / adaptability (ability to deal with stress, emotional stability, willingness to change, tolerance for ambiguity, sensitivity) Extracultural openness (variety of outside interests, interst in foreign cultures, openness, knowledge of local language(s), outgoingness and extroversion) Familiy situation (adaptability of the spouse and family, spouses positive opinion, willingness of the spouse to live abroad, stable marriage) Instruments: Interviews, tests, AC, references, interview with the spouse / partner
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Orienting / Training
Orienting and training include formal programs for briefing expatriates regarding the conditions in the host country, language training, look and see trips, sensitivity trainings, culture assimilator, contrast-culture program. The expatriate development program should be a predeparture cross-cultural training and a continuous training during the stay abroad.
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Fachhochschule Ludwigshafen am Rhein

Staying abroad

Prof. Dr. Jutta Rump

Many expatriates and their families are confronted with the so called cycle of international assignments:
1. The stage of expectation 2. The stage of culture shock - Enthusiasm for the host country - Friendly but perfunctory relationship to the people - Uncertainty and fear because of the differences in culture, language, society and tasks - Reducing the uncertainty by the retreat to the family, by the retreat to the group of expatriates, by criticizing the conditions of the host country - Integration - Accepting the local habits without losing the own identity - But risk of misdevelopment - Overemphasizing the own culture - Devaluing the own culture (going native)

3. The stage of adjustment

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Support during the international assignments


During the international assignments the company should inform the expatriates continuously about the corporate development and the development in the parent country, should support the expatriates to find accomodation, schools etc., should help to integrate in the workplace and in the subsidiary, should consider the expatriates in the HR planning process, should offer psychological help.
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Repatriation
Particularly after companies spend hundreds of thousands of Euros helping the person develop international expertise, it is disconcerting to know that perhaps 50% of returnees leave their companies within two years of coming home. For one thing, expatriates often fear that they are out of sight, out of mind during an extended foreign stay, and such fears are often well founded. Many firms hurriedly assign returning expatriates to mediocre or makeshift jobs. Additionally the returnee realizes that the firm has promoted the expatriates former colleagues while he or she was abroad. Even the expatriates family may undergo a sort of reverse culture shock, as they face the task of picking up old friendships and starting new schools, and giving up the perks of the overseas job, like a company car and driver.

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Solutions could be:


Seminars, in which newly arrived returnees pass on their knowledge and experience to relocating employees and their families Providing returnees with opportunities to use the foreign experiences HR planning for the returnees Organizational support (finding accomodation, schools etc) Contacts to other returnees

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

6.2 International Staffing


International staffing includes recruitment, selection and human resource development.

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Prof. Dr. Jutta Rump

Recruitment in an International Context


The international aspect of recruitment means that the labor market conditions become more heterogeneous, national differences of applicants have to be considered, cultural empathy is an important requirement, the family backround plays a role.

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The Environment of Recruitment in an International Context


External Environment Labor Market Conditions - Quality - Quantity in Different Countries Different legal Considerations Different Formal Qualification and Different Dokumentation of Qualifications Heterogeniety of Values, Attitudes and Behavior Pattern Internal Environment

Prof. Dr. Jutta Rump

Internationalization Model Human Resource Planning Promotion Policies: - Promotion from within - or a policy of filling positions from outside the organization The Firms Knowledge of Employees

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Internal Recruitment Sources and Methods


Methods transfer Sources PCN HCN Promotion

TCN

Depending on the corporate policy of internationalization

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

In international companies internal recruitment takes priority over external recruitment. This is based on the increased risk of international assignments. Exceptions are: - to fill entry-level jobs - to acquire skills not possessed by current employees - to obtain employees with different backgrounds - to provide a diversity of ideas.

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International Human Resource Development

Prof. Dr. Jutta Rump

International human resource development deals with the improvement of cross-cultural competencies and with the enhancement of international knowledge. The purpose of international human resouce development is: Availability of qualified employees Development of cross-cultural competencies and international knowledge Promotion of prospective managers and talented young employees Preparation for an international assignment Enhancement of motivation Increase of flexibility and job mobility Decrease of the resistance to work abroad Improvement of the collaboration in international teams Decrease of fluctuation rate ...

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Integration

Cooperation

Empathy, Sensitizing

Communication, Fluency in Language


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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

The Specific Feature of the International HRD


International HRD is chrarcterized by a high level of complexity. This complexity is based on different cultural conditions, different training and education systems, different training and education methods, different attitudes concerning the important qualifications, different attitudes concerning the career planning and career development, the heterogeneity of the target groups.
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Prof. Dr. Jutta Rump

The Functional Areas of the International HRD

The functional areas of international HRD are the cross-cultural training and development, international job rotation, working in international task forces.

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Prof. Dr. Jutta Rump

The Cross-Cultural Training and Development


The cross-cultural training and development is designed to provide learners with knowledge and skills needed for the assignment in foreign countries and / or for the collaboration in international task forces. The cross-cultural training and development prevent that the experiences in different countries and with other nationals stay on the surface, and that the prejudices prove to be right.

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

International Management Trainees

Expatriates Target Groups Employees Having International Contacts

Employees Working in International Task Forces

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Capability to Live and Work under Different Cultural Conditions

Knowledge of Language Content

Preparation for the Integration

Information about the Political, Economical and Social Conditions

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Cultural-General Cultural-General Training of the Cross-Cultural Communication - Cultural-general Simulation

InformaInformation tion - Language Training - Information about the Economical, Political, ... Conditions

III IV

I II
- Sensitivity-Training - Cas Studies - Field Experiences - Look and See Trips - Cross-(ex)change / Job Rotation

Experience Experience

Cultural-Specific Cultural-Specific

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

The Components Influencing the Cross-Cultural Training and Development


There are several components influencing the cross-cultural training and development: Qualification profil The job and the job environment The quality and the quantity of the international contacts The period of the international assignment The difference between the parent country and the host country

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6.3 International Compensation

Prof. Dr. Jutta Rump

There are several factors influencing the compensation program in international companies. External dimension: - Cross-cultural differences - Legal considerations in the parent country and host country - The labor market conditions in the parent country and host country - The level of prosperity in the parent country and the host country - The wage level in the parent country and the host country - The currency situation in the parent country and the host country Internal dimension: - The corporate policies: The corporate policy of internationalization - The compensation programs applied in the parent company and in the subsidiaries - Working conditions - Period of the international assignments - The purpose of international assignments
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

There are several models of job pricing in the international context. They correspond with the corporate policy of internationalization. Parent country-oriented compensation (PCC) (related to the ethnocentric policy) Host country-oriented compensation (HCC) (related to the polycentric policy) International compensation model (TCC) (related to the geocentric policy)

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Fachhochschule Ludwigshafen am Rhein

Parent Country-oriented Compensation

Prof. Dr. Jutta Rump

The parent country-oriented compensation refers to the income which a PCN would get in a comparable position with comparable performance. The parent country-oriented compensation does not depend on the place of assignment. gross salary (parent country) + Expatriation allowance + hardshop allowance = gross salary - Hypothetical taxes (parent country) = Net income (parent country) + Net difference cost of living + Net difference cost of housing + Net difference training expenses = disposale income (host country)
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Gross salary: The job requirements determine the gross salary. Expatriation allowance: The expatriation allowance is the equivalent and compensation of the risk of foreign assignment. Hardship allowance: The main purpose of the hardship allowance is to compensate difficult working and living conditions. (for example climate, family problems, health hazard, cross-cultural difficulties). Hypothetical taxes: In order to avoid fiscal disadvantages, hypothetical taxes must be deducted from the salary. The company pays the taxes which the expatriate has to pay in the host country. Net difference cost of living: This compensation correct the differences in purchasing power between the parent country and the host country. In addition currency conditions and the inflation rate are considered. Net difference cost of housing: This financial compensation guarantees appropriate housing standards. The real housing costs in the parent country are compared with the housing costs in the host country. Net difference training expenses: The allowance for training / education guarantees that the children of the expatriate get an education which correspond to the standards in the parent country.

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Host Country-oriented Compensation


The host country-oriented compensation refers to the job and the conditions in the foreign affiliated company. Gross salary (host country) + Adaptation grant + Net difference training expenses Gross salary - Taxes (host country) = Disposale income (host country)

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Adaptation grant: The purpose of the adaptation grant is to compensate the difficult working and living conditions. It includes an allowance for job mobility. Adaptation grants are paid only for a certain period of time. Net difference training expenses: The allowance for training / education guarantees that the children of the expatriate get an education which correspond to the standards in the parent country.

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

International Compensation Model


Employees who work constantly in foreign affiliated conpanies and who change the place of work often, need a flexible and adaptable compensation model. Gross salary (country average of comparable positions) - Hypothetical taxes (country average) = Net income (host country) + Net difference cost or housing + Net difference training expenses = disposale income (host country)

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Gross salary: The gross salary orientates by comparable positions and by their compensation standards in different countries. Hypothetical taxes: The hypothetical taxes are determined by the country average. Net difference cost of housing: This financial compensation guarantees appropriate housing standards. There is a special percentage which is comparable with the cost of housing in the particular host country. Net difference training expenses: The allowance for training / education guarantees that the children of the expatriate get an education which correspond to the standards in the parent country.

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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Other Financial Compensation Vehicles


Allowance for business and professional membership Allowance fort club memberships Company-provided automobile Company-provided housing Company-subsidized travel Removal allowance Assumption of language training Allowance for house keeping ...
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Fachhochschule Ludwigshafen am Rhein

Prof. Dr. Jutta Rump

Procedure of Payout
The procedure of payout includes the place of payout and the currency of payment. The currency of payment can be - the currency of the parent country, - the currency of the host country, - the currency of a third country or - a split of diffent currencies (split salary). Many companies prefer the split salary. One part is paid in the currency of the host country. It covers the cost of consumption. The rest is paid in the currency of the parent country or of a third country.

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The Specific Feature of Nonfinancial Compensation in Multinational Companies

Prof. Dr. Jutta Rump

The effects of nonfinancial compensation depends on the motives, values, and attitudes. In international companies with PCN, HCN and TCN a variety of motives, values, and attitudes exists. In order to consider the cultural differences, a special procedure is necessary. Identifying the different motives, values, and attitudes Considering cross-cultural equity Creating the comparability Checking the external fit with the external circumstances Checking the internal fit the internal conditions In international companies the nonfinancial compensation programs are characterized by a dilemma: On the one hand the specific features of the particular country have to be considered. On the other hand the principles of equity and equality have to be considered in order to avoid conflicts. 194

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E. Annex

Prof. Dr. Jutta Rump

Briscoe, D.: International Human Resource Management, Prentice Hall 1995. Dessler, G.: Human Resource Management, New Jersey 2003. Harvard Business Review: Managing People, Bosten 1999. Hilb, M: Transnationales Management der Human Ressourcen, Neuwied 2000. Mondy, W. Et al: Human Resource Management, New Jersey 2002. Scherm, E. (1999): Internationales Personalmanagement, Mnchen 1999. Scholz, C.: Personalmanagement, Mnchen 2001. Sparrow, P et al.: Globalization of Human Resources: Tracking the Business Role of International HR Specialists (Routledge Global Human Resource Management Series), New York 2004. Weber, W. / Festing, M. / Dowling, P. / Schuler, R. (1998): Internationales Personalmanagement, Wiesbaden 1998. Wunderer, R., Dick, P: Personalmanagement Quo vadis?, Neuwied 2002.
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