Copyright 2000 - South-Western College Publishing Module 1 - 1 ARE WE MOVING FROM COMMITMENT...

Copyright 2000 - South-Western College Publishing Module 1 - 1

ARE WE MOVING FROM COMMITMENT EMPLOYMENT TO SHORT TERM

TRANSACTIONAL EMPLOYMENT?

• “(It is) readily apparent (that) the old ‘employment contract’ is no longer sustainable; the past decades .. downsizing and reengineering efforts mark a systematic and permanent change in the relationships between corporations and employees.”

– Corporate Leadership Council, August 1996

• “The overarching trend in employment relations is to make everything ‘contingent,’ from jobs to benefits to organizational relationships.”

• Former U.S, Secretary of Labor, Robert Reich October 1997


Post World War II Environments for Human Resources

• 1945 - early 1980’s– Econ. Environment

• stable

• U.S. the major economic power

• regulated sectors with generally stable revenue and profit stream

• little foreign competition

– Human Resource Mgmt.• Routine

• Early 1980’s - Present– Econ. Environment

• uncertain• Multiple economic power

centers in the world (e.g., Europe, Asia)

• deregulation of major sectors• foreign competition

– Human Resource Management

• Contributor to firm success


Employment Relations Strategies• Traditional Strategies

– Long-Term Labor Purchase• employees hired so long as they performed well and

firm financially able to maintain position

• New Strategies– Workforce Commitment Model

• job security, investment in employees, maximize employee value added

– Labor Transactional Model• direct labor cost minimization

– Mixed Model• use of both models for different employee groups


Employment Models

Labor TransactionalModel

WorkforceCommitmentModel

Cost Minimization Employee Investment


Employment Models

Labor TransactionalModel

WorkforceCommitmentModel

Cost Minimization Employee Investment

GM-UAWGM-UAW(mid 1998)(mid 1998)

Ford-UAWFord-UAW(mid 1998)(mid 1998)


Variation Exists in the Employment Relationship; People-Centered Strategies

Exist!• Some firms believe their competitive

advantage is talented, motivated professional people who care!

• Commitment strategies provide implementation capability comes from an organization’s people, how they are treated, their skills and competencies and their efforts on the firm’s behalf.

• J. Pfeffer: 1998: The Human Equation.


Example: Starbucks: More than Just Coffee Beans!

• Mission Statement:– Provide a great work environment where we treat each

other with respect & dignity

– Embrace diversity as an essential component of how we do business

– Apply highest standards of excellence to purchasing, roasting & fresh delivery of coffee

– Develop enthusiastically customers all the time

– Contribute positively to communities & environment

– Recognize that profitability is essential for future success


Staffing of Committed HR Played a Key Role in Starbucks’ Growth Strategy

• Not only great products, but the atmosphere they created; key to creating a warm & inviting place is great people

• Turnover 65%; often double in restaurant industry

• All start at $6.25 ($2 better than minimum wage)

• All partners who work at least 20 hours per week get full benefits

• Bean stock, granted at 14 % of base pay; after 2 splits now, opportunity to build wealth at Starbucks is real


Way Partners are Treated Makes Supreme Difference in How They Treat

Customers– HR policies and procedures designed so partners

come first; assumption is great customer service will follow

– Training/Orientation• Each new partner goes through 24 hours of

orientation in retail skills, customer service, home brewing & coffee knowledge

• Each market (100 stores) has a learning development leader ; responsible for quality assurance of core training & succession planning for talented partners

• Promotion from within


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ENVIRONMENTAL CONTEXT

ORGANIZATIONAL BUSINESS

Managerial Discretion

(More Less)

Unilateral

Decisions

Negotiated

Decisions

Imposed

Decisions

Transaction

Translation

HR

Stra

tegy

HR

Rol

es

Transition

STR

AT

EGY

Transformation

Model for Understanding HR Strategy:Model for Understanding HR Strategy:Context, Roles, and ConstraintsContext, Roles, and Constraints


ENVIRONMENTAL CONTEXT

ORGANIZATIONAL BUSINESS

Managerial Discretion

(More Less)

Unilateral

Decisions

Negotiated

Decisions

Imposed

Decisions

Transaction

Translation

HR S

trateg

y

HR Roles

Transition

STRA

TEGY

Transformation

Payment per FLSA min. wage & overtime

Explanation of FLSA to mgt. & employees

Adjustment of sick leave policy to FMLA

Culture change withEEO law, mid 1960’s

Hiring DecisionEntry Level

Explain benefits outsourcing

RetirementBenefits Change

Merger andAcquisition

NegotiatingRetirement Plan

SummarizingColl. Bar. Agr.

Selection of Arbitrator

Change LR Strategy

Fig. 1.1A: Application of Decision-Making Framework to Common HR Decisions


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Factors Causing Centralization ofHuman Resource Function

• Scientific Management– Consistency in criteria for job performance

• Unionization– Consistency in treatment of all employees

covered by union

• Government Regulation– Unlawful practices associated with lack of

knowledge could result in legal liability

• Global Market Pressures– Creation of HR strategies


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Table 1WORK FORCE CO MMIT ME NTM ODE L

LABO R TRANSACTION M ODE L

Philosophy: “M ake or i nvest indeveloping human assets within the fi rm”

Philosophy: “B uy lab or available in themarket for a s pecific job”;

Goal: Maxi mize comm itment, emp loyeeempowerment, qual ity,& assignmentflexibil ity

Goal: Maximize employment flexibil ityvia minim izati on of o wnership

Human C api tal DevelopmentResponsibilit y: J oint emp loyee-empl oyerinvestments in develo ping organizationalhuman and s ocial capital

Human C api tal DevelopmentResponsibilit y: Em ployee solelyresp onsible for ensuring emplo yabil ityand development

Outsourcing St ance: Onl y workconsidered to be related to noncorecompetenci es o utsourced

Outsourcing S tance: Extensiveoutso urcing and fluid work arrangements

Emplo ym ent R elatio nship Focus: Longterm, Organizati on-focused, EmployeesViewed Primari ly as “Resources forDoi ng Busi ness”

Emplo ym ent Relationshi p Focus: Shortterm, jo b-focused, Employees viewedpri maril y as “Cost s of Doing Busi ness”

Economic R isk for Product MarketFluct uati ons: Joint R es ponsibil ity(employee & em ployer share)

Economic R isk for Product MarketFluct uat ions: Employee takes on al l risk

Comparisons Between WorkforceComparisons Between WorkforceCommitment and Labor TransactionalCommitment and Labor Transactional

ModelsModels


Pros & Cons of Employment Relationships

PROS• Amortize costs of training• Ease of performance evaluation• Incentives may work better since

both employer and employee assume a long-term relationship

• Greater loyalty to employer/co-workers

• Greater job assignment flexibility and willingness to work overtime

• Enhanced social and intellectual capital over time

CONS• Risk of variable demands for

labor

• Dark side of loyalty

• Dysfunctional behavior possible; problem of deadwood

• Familiarity can breed contempt

• Difficulty in getting rid of workers when not needed

• Risk of skill gaps


Mixed Model: Core/Non-CoreAdvantages• Person employed under a

model most appropriate for their contribution to the firm

• “Best of both worlds”

Disadvantages• Differences among

similarly situated employees can cause morale and equity problems

• Long-term sustainability?– American Airlines– UPS– Two-tiered wage structures


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Determinants of HR Strategy• Management Values

– How should we treat our employees?

• Size– Large firms may be able to “afford” a commitment

approach, but will they implement one?

• Production Process– Integrated process requires strong HR

• Nature of Product– Technologically advanced requires skilled workers

• Alignment Between Business and HR Strategy– investment and market penetration - commitment– undifferentiated product and cost minimization -

transactional


Kensi Exercise


Instructions

• Each member should take a piece paper from the envelope.

• Read your role and think about how that person would react to the given situation.

• Begin your discussion - The Manager of HR will act as the facilitator.

• You will have 20 minutes.


Discussion• What are the issues of concern? What were your solutions?

• How were the groups similar?Different?

• What is the best way for an organization to handle this type of situation?

• Discuss how HR decisions are made within a high-commitment organization versus a transactional approach?

• Using the framework, what kind of HR decision making choices and roles are reflected in the overtime decision?


Kensi’s Results

• Kensi had a team of management leaders from within the organization to investigate.

• They initiated employee surveys and meetings (an Associate representative attended all management meetings, as well).

• Because of the polarization involved with the two alternatives, Kensi implemented a third tactic. They started an entirely new line by hiring in more Associates.

Copyright 2000 - South-Western College Publishing Module 1 - 1 ARE WE MOVING FROM COMMITMENT...

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