!Week12:ManagingPeopleDrChristopherPokarier|EB202IntroductiontoBusiness
Somekeyterms
! Labourmanagement–seeslabourasoneinputamongstothers(afactorofproduction)andsuggestsanimageoflabourintensiveindustry
! Humanresourcemanagement(HRM)–impliesthatstaffareanimportantresourceandnotjustacostlyinput
! StrategicHRM–suggeststhatHRMisaveryimportantpartofthestrategicplanningoffirmsandthattheHRMmanagerhassubstantialseniority
!HumanresourcemanagementGetting,enhancing,andrewardinggoodpeople+managingtheproblemones
Internalvsexternallabourmarkets
! An‘internallabourmarket’meansstaffforparticularrolesarerecruitedfromemployeesalreadyinsidethecompany
! The‘externallabourmarket’isanyoneoutsidethefirm–ie.Notalreadyanemployee
! ‘Internalisation’involvesthecompanytakinggreatercontrolofthesupplyofitsownlabour
! Whetherfirmsrelymoreoninternalorexternallabourmarketstofillpositionsdependsonlaws(eg.howeasilycanafirmfiresomebody,cantheyuse‘despatch’casualworkersetc),industrycharacteristicsetc
Internalisation:implications
! Firmswillneedtotrainexistingstaffforspecialistroles
! Initialrecruitmentofstaffwillfocusongeneralabilitiesandadaptabilityandlessonjob-specificskills(eg.recruitmentofnewgraduatesbylargeJapanesefirms)
! Employeesidentifystronglywiththefirmbutmaylosemotivation
! Highfixedcosts
! Moredifficulttobringinneededspecialisttechnicalandmanagerialexpertise
Internalisation:benefits
! Cantrainstafffortheparticulartechnicalneedsofthecompany
! Practicesthatretainemployeesalsoallowthefirmtoearnareturnontheirinvestmentintraining
! Readysupplyoflabourwhenthelabourmarketis‘tight’–thatis,skilledpeoplearescarce
! Lowemployeeturnovercanhelptopreserveandprotectcompanyknowledge
! Ifemployeeshave‘firm-specifichumancapital’theyarelesslikelytoquit,andmaybe‘trapped’–tothebenefitofthefirm
Japan’s‘lifetimeemployment’:benefits
! Greatercommitmentofemployeestothelong-terminterestsoftheorganisation
! Managementcanconfidentlyinvestinstafftrainingastheyknowtheycangetareturnfromit
! Employeesfeelasharedcommitmentto,andidentitywith,theorganisation–supportingteamwork
! Littlelossofafirm’sknowledge-basedcompetitiveadvantages
! BUT‘Lifetimeemployment’actuallyhasmostpeopleleavethefirmintheirmid-50s
! Generallyonlymedium&largefirmsofferit;andlay-offsmorecommonsincethelate1990s
Internalisation:disadvantages
! Lesslearningfromoutsidethefirm–fromotherfirmsinthesameindustryorotherfirms
! Anorganisationalculturecanbecomefixed,conservative,andprejudicedagainstnewideasandwaysofdoingthings
! Implicitorexplicitguaranteesofpermanentemploymentcancreatesevereadverseselectionandmoralhazardproblems
RecentHRMinJapan
! Japan’slifetimeemploymentandseniority-basedwagesworkedwellinagrowingeconomywithlabourshortagesbutisfacingsomepressuresforchange
! Olderemployeeprofilesareverycostly
! Useofcontractemployeesforflexibility
! Butincreasinglylabourshortagesareconstrainingbusinessgrowth(eg,inconstruction,services-healthcare,retail,restaurantsetc)
! specialistsinshortsupply(eg.ITprogrammers)workonproject-basisandchangeemployerseasily
! growthoftheheadhuntingbusiness&mid-careerhiring
Adverseselection&moralhazard
! Lifetimeemployment’presentstheseseriousrisks
! Adverseselection–peoplewhoknowtheyhavelittletalentandriskbeingfiredmayseek‘secureemployment’
! Riskadversepersonalitieswilljoinsuchfirms–perhapsreducingcreativity,innovationandinternalcriticism
! Moralhazard–thebehaviourofpeopleguaranteedajobmaychange…shirking
Attenuatingmoralhazard
Theshirkingriskcanbereducedthrough
! Incentivesystemssuchasbonusesforhighperformance
! Internalcompetitionssuchasthrough..
! Thepromotionsystem
! Accesstotraining..Increasingpromotionchances
! Accesstobenefitssuchascompanytrips,entertainmentallowancesetc
! Punishmentsthroughtransfers,ostracismviaperformanceassessmentsetc
Attenuatingadverseselection
Employersneedperformanceindicators:
! Academichistory– henceindividualinvestments(effort,money)incompetitiveeducationmarketshaveasignallingeffectthatisoftenmoreimportantthantheknowledgeresourcesgained
! Personalprofiles–otheractivitiesetc(especiallybecauseoftheformer)
! References–fromteachers,pastemployers
! Companytesting–includingpersonalitytestingdoneforcompaniesbythirdparties
Recruitingstaff
! Hiringnewstaffisexpensive&veryhighriskforfirms
! Managers&otheremployeesinvolvedinhiringgenerallydonotwanttotakerisks
! Everybodyinvolvedinhiringneedsgoodreasonstojustifytheirhiringdecisions(hencestandardtestsetc)
! Henceformalqualifications(fromrespectedinstitutions)andproofofperformancemakesgettinghiredeasier
! Plus‘thedoIwantthispersonasacolleague?’criteriamustbemetbythecandidate
! Staffarehiredtoaddmorevaluethantheycost!