Developing an Effective Workforce

Following  selection, the next goal of HRM is to develop employees into an effective work- force. Development includes training and performance appraisal.


Training and development represent a planned  effort by an organization to facilitate em- ployees’ learning  of job-related skills and behaviors.70  Organizations  spent some $51.1 billion for training in 2005. The training budget of IBM alone in that year was $750 mil- lion.71  The most common method of training is on-the-job training. In on-the-job training (OJT), an experienced employee is asked to take a new employee “under his or her wing” and show the newcomer how to perform job duties. OJT has many advantages, such as few out-of-pocket costs for training facilities, materials, or instructor fees and easy transfer of learning back to the job. When implemented well, OJT is considered the fast- est and most effective means of facilitating learning in the workplace.72 One type of OJT involves moving people to various types of jobs within the organization, where they work with experienced employees to learn different  tasks. This cross-training may place an em- ployee in a new position  for as short  a time  as a few hours  or for as long  as a year, enabling the employee to develop new skills and giving the organization greater flexibility.

Another type of on-the-job training is mentoring, which  means a more experienced em- ployee is paired with a newcomer or a less-experienced worker to provide guidance, support, and learning opportunities. Other frequently  used training  methods include the following:

  • Orientation training, in which newcomers are introduced to the organization’s culture, standards, and goals.
  • Classroom training, including  lectures, films, audiovisual techniques, and simulations-makes up approximately 70 percent of all formal corporate training.73
  • Self-directed learning, also called programmed  instruction,  which involves the use of books, manuals, or computers to provide subject matter in highly organized and logical sequences that require employees to answer a series of questions about the material.
  • Computer-based training, sometimes  called e-training, including computer-assisted instruction,  Web-based training, and teletraining. As with self-directed learning, the employee works at his or her own pace, and instruction is individualized, but the training program is interactive, and more complex, nonstructured information  can be communi- cated. E-training has soared in recent years because it offers cost savings to organizations and allows people to learn at their own pace.74

Exhibit 9.8 shows the most frequently  used types and methods of training in today’s organizations.

Corporate Universities. A recent popular approach to training and develop- ment is the corporate university. A corporate university is an in-house training and education facility that offers broad-based learning opportunities  for employees—and fre- quently for customers, suppliers, and strategic partners as well—throughout their careers.75

One well-known  corporate university is Hamburger University, McDonald’s worldwide training center, which has been in existence for more than 40 years. Numerous  other companies, including  IBM, FedEx, General Electric, Intel, Harley-Davidson, and Capi- tal One, pump millions of dollars into corporate universities to continually build human capital.76  Employees at Caterpillar attend courses at Caterpillar University, which com- bines e-training, classroom sessions, and hands-on  training activities. The U.S. Depart- ment of Defense runs Defense Acquisition University to provide ongoing training to 129,000 military and civilian workers in acquisitions, technology, and logistics.77  Although corporate universities have extended their reach with new technology  that enables distance learning via videoconferencing and online education, most emphasize the importance of classroom interaction.78

Promotion  from  Within. Another way to further employee development  is through promotion from within, which helps companies retain valuable people.  This provides challenging  assignments, prescribes new responsibilities, and helps employees grow by expanding and developing their abilities. The Peebles Hydro Hotel in Scotland is passionate about promoting from within as a way to retain good people and give them op- portunities for growth. A maid has been promoted  to head housekeeper, a wine waitress to restaurant head, and a student worker to deputy manager. The hotel also provides constant training in all areas. These techniques, combined  with a commitment  to job flexibility, have helped the hotel retain high-quality  workers at a time when others in the tourism and hospitality industry are suffering from a shortage  of skilled labor. Staff members with 10, 15, or even 20 years of service aren’t uncommon at Hydro.79

Workforce  Optimization. A related approach  is workforce optimization, which can be defined as putting the right person in the right place at the right time.80 With today’s emphasis on managing and building  human capital, HR professionals are pursuing a range of strategies that help organizations make the best use of the talent they have and effectively develop that talent for the future. New software programs and information tech- nology  can help identify people with the right mix of skills to tackle  a new project, for example, as well  as pinpoint  where to move staff internally to ensure they have opportunities for growth and development. IBM is a leader in workforce optimization with a technology- based staff-deployment tool it calls the Workforce Management Initiative. One use of the system is as a sort  of in-house recruiting tool that lets managers search for employees with the precise skills needed for particular projects. However, the system’s greatest impact  is that it helps HR professionals and managers analyze what skills employees have, see how  those talents match up with current and anticipated needs in the business and technology  environ- ment, and devise job transfers and other training  to help close skills gaps.81


Performance appraisal comprises the steps of observing and assessing employee  perfor- mance, recording the assessment, and providing  feedback to the employee. During perfor- mance appraisal, skillful managers give feedback and praise concerning the acceptable ele- ments of the employee’s performance.  They also describe performance  areas that need improvement. Employees can use this information to change their job performance.

Performance appraisal can also reward high performers with merit pay, recognition, and other rewards. However, the most recent thinking is that linking performance appraisal to rewards has unintended  consequences. The idea is that performance appraisal should be ongoing, not something that is done  once a year as part of a consideration  of raises. At,  a provider  of VOIP (voice over Internet protocol) phone services, people are reviewed every two weeks. Founders John Nix and Larry Speer were ranked among the 15 “2005 Best Bosses” by Fortune  Small  Business magazine  and Winning Workplaces, partly because of innovative practices that let their mostly young workers know how they’re doing and how they can get better.82

Generally,  HRM  professionals  concentrate  on two things to make performance appraisal a positive  force  in their organizations: (1) the accurate  assessment of perfor- mance through the development and application of assessment  systems such  as rating scales, and (2) training  managers to effectively  use the performance appraisal interview,  so managers  can provide feedback  that will  reinforce good performance  and motivate employee development.

Assessing Performance Accurately. To obtain an accurate performance rating, managers acknowledge that jobs are multidimensional  and performance thus may be multidimensional  as well.  For example, a sports broadcaster might perform well on the job-knowledge dimension; that is, she or he might be able to report facts and figures about the players and describe which rule applies when there is a questionable  play on the field. But the same broadcaster might not perform  as well on another dimension, such as com- munication. The person might be unable to express the information in a colorful  way that interests the audience or might interrupt the other broadcasters.

For performance to be rated accurately, the appraisal system should require the rater to assess each relevant performance dimension.  A multidimensional form increases the use- fulness of the performance appraisal and facilitates employee growth and development.

A recent trend in performance appraisal is called 360-degree feedback, a process that uses multiple raters, including self-rating, as a way to increase awareness of strengths and weaknesses and guide employee development. Members of the appraisal group may include supervisors, co-workers, and customers, as well as the individual, thus providing appraisal of the employee from a variety  of perspectives.83 One study found that 26 percent of com- panies used some type of multirater performance appraisal.84

Another alternative performance-evaluation method is the performance review  ranking system.85  This method grew quite popular over the past several years, with as many  as one third of U.S. corporations using some type of forced ranking system.86 However, because these systems essentially  evaluate  employees  by pitting them against one another, the method is increasingly coming under fire. As most commonly  used, a manager evaluates his or her direct reports relative to one another  and categorizes each on a scale, such  as A = outstanding performance, B = high-middle performance, or C = in need of improve- ment. Most companies routinely fire those managers falling in the bottom 10 percent of the ranking. Proponents say the technique  provides an effective  way to assess performance and offer guidance for employee development.  But critics of these systems, sometimes called rank and yank, argue that they are based on subjective judgments, produce skewed results, and discriminate  against employees who are “different” from the mainstream. A class-action lawsuit charges that Ford’s ranking system discriminates against older manag- ers. Use of the system has also triggered employee lawsuits at Conoco and Microsoft, and employment lawyers warn that other suits will follow.87

In addition, critics warn that ranking  systems significantly hinder collaboration and risk taking, which are increasingly important for today’s companies striving for innovation. One recent study found that forced rankings that include firing the bottom 5 or 10 percent can lead to a dramatic improvement  in organizational performance in the short term, but the benefits  dissipate over several years as people become focused on competing with one an- other rather than improving the business.88  Many companies, including  General Electric, the most famous advocate of forced rankings in recent years, are building more flexibility into the performance review ranking system, and some are abandoning it altogether.89

Despite  these concerns, the appropriate  use of performance ranking has been useful for many companies, especially as a short-term way to improve performance. A forced ranking system instituted  by new HR director Priscilla Vacassin, for instance, has been one key to helping the British banking firm Abbey recover from years of sluggish performance.90   A variation of the system is helping U.S. restaurant chain Applebee’s retain quality workers in the high-turnover restaurant business.

Performance  Evaluation  Errors. Although we would like to  believe that  every manager assesses employees’   performance  in  a   careful and  bias-free manner, researchers have identified several rating problems.91 One of the most dangerous is stereotyping, which occurs when  a rater places an employee into a class or category based on one or a few traits or characteristics—for example, stereotyping an older worker as slower and more difficult to train. Another rating error is the halo effect, in which a manager gives an employee the same rating on all dimensions  even if his or her perfor- mance is good on some dimensions and poor on others.

One approach to overcome performance evaluation errors is to use a behavior-based rating technique,  such as  the behaviorally anchored  rating scale.  The behaviorally anchored rating scale (BARS) is developed from critical incidents pertaining to job performance. Each job performance  scale is anchored with specific behavioral statements that describe varying degrees of performance. By relating employee performance to specific incidents, raters can more accurately evaluate an employee’s performance.93

Exhibit 9.9 illustrates the BARS method for evaluating a production  line supervisor. The production  supervisor’s job can be broken  down into several dimensions,   such as equipment maintenance, employee training,  or work scheduling. A BARS should be devel- oped for each dimension.  The dimension in Exhibit 9.9 is work scheduling. Good perfor- mance is represented by a 4 or 5 on the scale and unacceptable performance  as a 1 or 2. If a production supervisor’s job has eight dimensions, the total performance evaluation will be the sum of the scores for each of eight scales.

Source: Daft Richard L., Marcic Dorothy (2009), Understanding Management, South-Western College Pub; 8th edition.

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