Week 12: Managing People

Transcription

1 Week 12: Managing People! Dr Christopher Pokarier EB202 Introduction to Business

2 Some key terms! Labour management sees labour as one input amongst others (a factor of production) and suggests an image of labour intensive industry! Human resource management (HRM) implies that staff are an important resource and not just a costly input! Strategic HRM suggests that HRM is a very important part of the strategic planning of firms and that the HRM manager has substantial seniority

3 Human resource management! Getting, enhancing, and rewarding good people + managing the problem ones

4 Internal vs external labour markets! An internal labour market means staff for particular roles are recruited from employees already inside the company! The external labour market is anyone outside the firm ie. Not already an employee! Internalisation involves the company taking greater control of the supply of its own labour! Whether firms rely more on internal or external labour markets to fill positions depends on laws (eg. how easily can a firm fire somebody, can they use despatch casual workers etc), industry characteristics etc

5 Internalisation: implications! Firms will need to train existing staff for specialist roles! Initial recruitment of staff will focus on general abilities and adaptability and less on job-specific skills (eg. recruitment of new graduates by large Japanese firms)! Employees identify strongly with the firm but may lose motivation! High fixed costs! More difficult to bring in needed specialist technical and managerial expertise

6 Internalisation: benefits! Can train staff for the particular technical needs of the company! Practices that retain employees also allow the firm to earn a return on their investment in training! Ready supply of labour when the labour market is tight that is, skilled people are scarce! Low employee turnover can help to preserve and protect company knowledge! If employees have firm-specific human capital they are less likely to quit, and may be trapped to the benefit of the firm

7 Japan s lifetime employment : benefits! Greater commitment of employees to the long-term interests of the organisation! Management can confidently invest in staff training as they know they can get a return from it! Employees feel a shared commitment to, and identity with, the organisation supporting teamwork! Little loss of a firm s knowledge-based competitive advantages! BUT Lifetime employment actually has most people leave the firm in their mid-50s! Generally only medium & large firms offer it; and lay-offs more common since the late 1990s

8 Internalisation: disadvantages! Less learning from outside the firm from other firms in the same industry or other firms! An organisational culture can become fixed, conservative, and prejudiced against new ideas and ways of doing things! Implicit or explicit guarantees of permanent employment can create severe adverse selection and moral hazard problems

9 Recent HRM in Japan! Japan s lifetime employment and seniority-based wages worked well in a growing economy with labour shortages but is facing some pressures for change! Older employee profiles are very costly! Use of contract employees for flexibility! But increasingly labour shortages are constraining business growth (eg, in construction, services - healthcare, retail, restaurants etc)! specialists in short supply (eg. IT programmers) work on projectbasis and change employers easily! growth of the headhunting business & mid-career hiring

10 Adverse selection & moral hazard! Lifetime employment presents these serious risks! Adverse selection people who know they have little talent and risk being fired may seek secure employment! Risk adverse personalities will join such firms perhaps reducing creativity, innovation and internal criticism! Moral hazard the behaviour of people guaranteed a job may change shirking

11 Attenuating moral hazard The shirking risk can be reduced through! Incentive systems such as bonuses for high performance! Internal competitions such as through..! The promotion system! Access to training.. Increasing promotion chances! Access to benefits such as company trips, entertainment allowances etc! Punishments through transfers, ostracism via performance assessments etc

12 Attenuating adverse selection Employers need performance indicators:! Academic history hence individual investments (effort, money) in competitive education markets have a signalling effect that is often more important than the knowledge resources gained! Personal profiles other activities etc (especially because of the former)! References from teachers, past employers! Company testing including personality testing done for companies by third parties

13 Recruiting staff! Hiring new staff is expensive & very high risk for firms! Managers & other employees involved in hiring generally do not want to take risks! Everybody involved in hiring needs good reasons to justify their hiring decisions (hence standard tests etc)! Hence formal qualifications (from respected institutions) and proof of performance makes getting hired easier! Plus the do I want this person as a colleague? criteria must be met by the candidate! Staff are hired to add more value than they cost!