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HRManagement Human Resource Management Simulation Jerald R Smith, Florida Atlantic University Peggy A. Golden, Florida Atlantic University Michael Deighan, Interpretive Simulations

Charlottesville, Virginia, USA

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Copyright Notice This manual and the simulation described in it are copyrighted with all rights reserved by Interpretive Software, Inc. Under the copyright laws, neither this manual nor the simulation may be copied, in whole or in part, without written consent of the authors, except in the normal use of the simulation for educational purposes, and then only by those with a valid license for use. The same proprietary and copyright notices must be affixed to any permitted copies as were affixed to the original. This exception does not allow copies to be made for others, whether or not sold. Under the law, copying includes translating into another language or format. Purchasing the simulation experience gives the owner the right to participate in a unique learning event. Each student or participant must purchase the simulation to take part in the event or the institution sponsoring the event must purchase for the entire group participating in the event. Limited Warranty on Media and Manuals In no event, will Interpretive Software, Inc. be liable for direct, indirect, special, incidental, or consequential damages resulting from any defect in the software or its documentation, even if advised of the possibility of such damages. In particular, the authors shall have no liability for any programs or data stored in or used with the computer products, including the cost of recovering such programs or data. This simulation experience is sold, “as is,” and you, the purchaser, are assuming the entire risk as to its quality and performance. The warranty and remedies set forth above are exclusive and in lieu of all other, oral or written, express or implied. For more information about other products from Interpretive Software, please contact: Interpretive Simulations 1421 Sachem Place, Suite 2 Charlottesville, VA 22901 Phone: (434) 979-0245 Fax: (434) 979-2454 Website: http://www.interpretive.com/

Discover a Better Way to Learn. Active Learning through Business Simulations. Copyright © 1994, 1996–2007 Jerald R. Smith and Peggy A. Golden; Copyright © 1995 Prentice Hall, Inc.; Copyright © 2008–2019 Interpretive Software, Inc. All rights reserved. Printed in the United States of America. No part of this book may be used or reproduced in any manner whatsoever without written permission of Interpretive Software, Inc. Graphic images used in manuals and incident videos © Bigstock.com, iStock.com, and Getty Images. Audio used in incident videos © Getty Images.

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About the Authors The late Dr. Jerald Smith authored eight simulation games spanning many interest areas in management and marketing. He served as a Professor of Business Strategy and Policy at Florida Atlantic University, and he taught a broad range of courses at the undergraduate, masters, and doctoral levels. He was one of the first to teach an online MBA course for on-the-go professionals. Dr. Smith consulted for Fortune 100 companies in diverse areas such as ethics training and supervision, and he helped formulate strategic initiatives for these companies. He authored numerous articles. Dr. Peggy Golden is currently Professor Emeritus of Management and International Business at Florida Atlantic University, where she has taught graduate and doctoral courses in Strategy and the Environment of Business. She has also taught courses on global competition in Spain and to computer industry executives in Asia. Prior to her arrival at FAU, Golden taught at the University of Louisville for five years in a variety of areas including the management of information systems. All courses have been taught through extensive use of cases, experiential exercises, and simulation experiences to reinforce the learning process. In addition to teaching college courses, Dr. Golden has also conducted numerous workshops in the development of competitive strategy, general management principles, special topics for women managers, time management, decision-making, and team-building. Consulting activities include strategic planning, systems analysis and design, and management of change. Dr. Golden has been an active researcher and writer. For example, she has studied corporate reputation and the interaction of corporate governance on top management team pay disparity. She has published seven management simulation games, and she has published numerous articles and papers in the areas of strategy formulation, strategy implementation, simulation development, and simulation use. Michael Deighan is a coauthor on the web-based editions of Airline, Corporation, Entrepreneur, and HRManagement. His expertise, insight, and creativity proved invaluable and made it possible to convert these models to their current web-based versions. Michael joined Interpretive Simulations in 1989 as lead software developer and has served as manager of technology and content development. He is coauthor on a number of Interpretive simulations: PharmaSim, BizCafe, StratSimMarketing, StratSimManagement, StratSimChina, CountryManager, and MarketShare. In addition to developing software, he has been teaching computer programming classes at Piedmont Virginia Community College in Charlottesville, Virginia, since 1990. Michael received his B.A. in German and Economics from Washington and Lee University, and an M.A. in German from the University of Virginia.

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Acknowledgements A moment of appreciation... Many professors from many universities and colleges have made several excellent suggestions concerning the algorithm and student manual. Although we fear that we may leave someone out, we would still like to thank the following early adopters and beta testers: Dick Barth, Bob Beaver, Robin Berkley, Monty Bohrer, Michiel Buys, Melisa Cardon, Julia M. Chambers, Chan Teng Heng, Beth Crockford, Tom Corrigan, Carrell Decker, Teri Domagalski, Janice Downton, Sandy Edwards, Ann Fiedler, Frank, Eleanna Galanaki, Paul Gillard, Gretchen Gemeinhardt, Catherine Giunta, David Hayes, Brian Hoekstra, Greet Van Hoye, Laura Kozloski, Jane Knight, Bonnie Leonhardt, Julie Indvik, Robert C. McHenry, Bob McHenry, Mary Markert, James R. Maxwell, Jim Pavelle, Latha Poonamallee, Chet Robie, Larry Siebers, Wendy L. Seligmann, Joe Smith, Pauline Stamp, Scot Trossen, Kevin Tasa, Tom Timmerman, Temeca Valian, Allen Wilson, Kenneth Zantow, Katrina Zalatan, and Deborah Zinni. If there were an Emeritus award, it would go to Emeric Solymossy at Western Illinois University–Quad Cities, Robyn Berkley at Rensselaer Tech, and Stan Malos for additional testing beyond the call of duty on the 2nd edition. Thanks to Daniel J. Koys of DePaul University for suggesting the health care incident and for providing feedback on its implementation. Thanks also to Jim Pavelle for suggesting the Progress Report form. The latest release of HRManagement incorporates the feedback of the 50,000+ users of the simulation since its initial release. We want to acknowledge the hard work and dedication of a number of Interpretive employees—especially Clayton Shumate, Patrick Neeley, Matt Travis, Steve Messing, Johanna Ackert, Caleb Sancken, Sarah Schmitz, Rachel Hill, Tim Melson, Tim Sams, and Colin Krueger. Award of Honor James Schreier, President of Far Cliffs Human Resource Consultants ([email protected]) was instrumental in the original version and updates in salary levels and employee benefit choices to let the simulation reflect real world levels. He also contributed to a number of incidents.

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Contents Introduction HRManagement Quick Start Guide HRManagement Manual

Case Human Resources Department Budget Decisions Environment Reports and Decision Analysis Next Step Summary of Decision Variables

HR Planning & Organization The Planning Process Budget Planning HR Decisions Measuring Results Team Organization Summary

Appendix Glossary Image Attribution Index

1 3 4

5 7 8 16 16 17

19 22 25 27 31 34 35

37 38 42 43

Printed November 14, 2019

HRMANAGEMENT

Introduction

2 HRManagement is a simulation that allows you to manage the Human Resources Department of a medium-sized organization. The type of organization is not industry specific and could be forprofit or non-profit, in either a manufacturing or service industry. The simulation gives you the opportunity to apply human resources concepts in an environment that encourages experimentation. As a member of a human resources management team, you will make about for your firm. In making your decisions, you will need to allocate resources limited by an annual budget. You will be competing against firms run by other teams in your class, each starting with the same number of employees and with the same budget. Your goal is to improve the performance of the organization based on measures such as . By making decisions that are better than your competitors’, your team will get better results at a lower cost than other firms in the industry. Typically, each team’s organization is left up to the team. Teams are expected to establish objectives, plan their strategy, and then make the required decisions dictated by these plans. These decisions are input directly into simulation decision pages online. When the simulation is advanced, you will be able to view the results of your decisions in a variety of department and industry reports. This process is repeated for up to 12 simulated quarters, or three years. In addition to the regular decisions, you may have to respond to issues raised by “incidents” (minicases) and complete supplemental assignments chosen by your instructor.

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HRManagement Quick Start Guide 1. READ THE CASE • Company starting situation • Background on HR responsibilities 2. START-UP DECISION • Access simulation from course website • Input a name for your business. This is required to access the period decisions. 3. • • • •

PERIOD DECISIONS Staffing Wages & Benefits Training Programs

4. DECISION ANALYSIS • Check each decision page for analysis • Budget • Decision Summary Go back to Step 3 until satisfied with decisions. 5. SIMULATION ADVANCES • Check schedule for times • Complete decisions before deadline If the simulation is over, skip to Step 7. 6. EVALUATE RESULTS • Department reports • Environment reports Go back to Step 3. 7. SIMULATION ENDS • Evaluate team performance • Review what you have learned Your instructor may require incident decisions and additional assignments during the simulation. Check the schedule and messages on your course website for details.

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HRManagement Manual The remainder of this manual is divided into the sections described below. Your understanding and success in HRManagement will be greatly enhanced by reading this manual before you begin the simulation. The manual will answer most of the questions students typically have during the simulation experience, and reading it has the added benefit of improving your competitiveness. Contextual help within the simulation interface and Frequently Asked Questions, “FAQs,” on your course site provide more information. This will also serve as an introduction to the situation at the start of the simulation. HR Planning & Organization presents a general discussion of human resources management: situation analysis, budget planning, HR functions, and performance measures. It serves as a guide in developing and executing your HR plan. The Appendix contains a glossary and index. The glossary contains human resource terms that are used in the simulation.

HRMANAGEMENT

Case

6 You are to assume the newly created position of Human Resource Director for a medium-sized firm with over . The firm has experienced significant expansion in the past few years; the Human Resources Department and its functions have not kept pace with company growth. The chief executive officer (CEO) has instructed you to get the Human Resources Department organized and build a strong HR function. You have wide latitude in this area, and the CEO has encouraged you to “get this organization moving.” You will want to set some ambitious, yet realistic and quantifiable, goals for the Human Resources Department.

The firm has no policy on promotions and has hired into the upper levels of management from the outside as well as promoted from within. Employee training is currently the responsibility of each department head and consists solely of on-the-job learning; no formal instruction is provided. Economic conditions in your region are good and unemployment rates are average.

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Human Resources Department Budget

This year, the annual budget has been increased to to provide you with the extra resources you will need to strengthen the HR function. Future budget amounts will be made available as the simulation progresses. Each quarter, your remaining annual budget will be displayed in the Budget report. If so, you will be notified via the Dashboard. For hiring, training, and program decisions, the related expenses are charged against the budget in the period in which they are incurred, and you can adjust your decisions from quarter to quarter. Compensation decisions are handled a little differently, since they affect results from that period on. When you add a benefit to the employee compensation package or increase wages, your budget will be charged for the additional benefit expense or wage increase for that first quarter and that quarter only; in subsequent quarters, the firm will absorb these expenses. Carefully analyze your budget to ensure that you do not overspend.

Quarterly decisions must be made within these budgetary constraints: • This is standard business procedure. Exceeding the budget at the end of the year (every fourth quarter) is a serious managerial deficiency and will have negative consequences. Your budget is limited and cannot immediately meet all your departmental needs. You must make a budgeting plan that implements your departmental objectives for the year and use it to guide your decisions each quarter. You may find that your plan will need adjustment as the simulation progresses. For the first year, your budget is $1,400,000.

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Decisions Sta Staffing ffing It is important for you to provide enough employees at all job levels to meet production goals each quarter. This means replacing workers lost to turnover while adjusting for changes in productivity and required units of production.

Method Methodss There are two methods of filling positions. Although the latter method has been a primary method of filling management positions in the past, One advantage to hiring from outside the firm is There is a distinct cost difference between the methods of filling positions. Hiring costs are automatically charged against your budget when you hire a new employee (you will not need to enter hiring costs into the simulation) and should be considered while planning your budget. Hiring expenses include costs for recruiting, interviewing, and testing, and they may include additional costs for employment agency fees and travel expenses. Outside Hiring Costs Automatic Job Charge per Level Employee $15,000 5 $12,000 4 3 $10,000 $7,000 2 $2,000 1 Keep in mind, however, that

Cos Costt to Lay Off Empl mployees oyees If the firm’s productivity per employee increases, it could find itself with too many employees. The cost to cost to lay off each Level 1 employee is $1,000 ($2000 × 0.50).

. For example, the

9 Overti Overtime me If you do not have enough employees to meet the production quota while working standard shifts, employees will have to put in extra hours to make the units required to meet sales. Some of the overtime cost will be charged to the HR Department budget and

Demograp Demographics hics One of the problems facing the human resources director in your organization is the lack of females and minorities at all job levels. The firm has fewer female and minority workers than would be expected given the local working population. Because of the rapid growth of the firm, little effort has been made to have a representative workforce. Although there is no litigation concerning this imbalance at the present time, the new human resource director has been directed by the CEO to begin diversifying the workforce. A percentage of total hires is established in each quarter for hiring minorities and females. The percentage represents a policy that should be considered something between an optimum and a minimum percentage. There is no guarantee that the exact number of females and minorities can be hired as other firms are also attempting to correct imbalances. Males or females can do all the jobs in the firm. The table below gives the current workforce demographics.

Job Level 5 4 3 2 1

Firm Number of Employees 20 25 50 60 500

Firm Females 0 (0%) 1 (4%) 10 (20%) 12 (20%) 60 (12%)

Firm Minorities 0 (0%) 0 (0%) 5 (10%) 6 (10%) 40 (8%)

Community Females

Community Minorities

25% 20% 30% 35% 40%

20% 25% 25% 25% 30%

Employ Employee ee TTurnover urnover The firm’s

is comparatively contributing to high turnover. Department heads estimate that A rating of 50 indicates morale is lackluster and many employees are coming to work with indifferent attitudes. Some managers in the firm have mentioned one or more of the following as possible causes of the low morale: .

10 Producti Productivv ity . Although industry-wide figures are not available, it is felt that . Productivity is not normally the responsibility of the human resources director; it is included in the simulation because of its close relationship to key human resource areas such as turnover, quality, grievances, etc. . If productivity increases, there will be fewer Level 1 and Level 2 workers to employ; therefore, hiring costs as well as the cost of wages and employee benefits will be lower. Be aware that

Wa ges Wage rates for the firm are below average for the local community. Decisions concerning the level of wages and benefits are not traditionally the sole responsibility of a human resource director, but the CEO has given you the responsibility of making these decisions. However, , and the increases must be within budget. Be careful when increasing wages in a quarter because the cost can have a significant impact on your entire annual budget. The following table illustrates the wage rates (excluding benefits) that are currently in effect at the firm, along with the median wage rates in the local area. Level 5 4 3 2 1

Job Titles and Quarterly Wage Rates Local Area Wages Wages at this Firm Typical Job Titles $19,000 per quarter $18,000 per quarter executive managers, engineers $16,000 per quarter $14,000 per quarter department heads, staff specialists $14,000 per quarter $12,000 per quarter department supervisors, technicians $11,400 per quarter $10,000 per quarter direct supervisors, skilled positions $17.31 per hour $15.38 per hour semi-skilled positions ($9,000 per quarter) ($8,000 per quarter)

Empl plo oyee Ben enef ef efiits The firm has these are presently . Employees do not pay any part of these benefits. An analysis of your current benefits and costs (as a proportion of payroll) is shown in the next table.

11 Proportion of Payroll Social Insurance Program 7.65% Unemployment Insurance 1.00% Health Care Costs (Tier 1) 4.35% Workers’ Compensation Benefits (injuries on-the-job) 1.00% Vacation/Holiday Policy 5.00% Sickness Pool 1.00% Total % of Payroll Cost: 20.00% Employee Benefits

Each “Add another Vacation/Personal/Sick Day” will add one additional non-work day to be accrued and used appropriately. For example, if 4 days are added, a beginning employee would have 14 days t...