High Performance Human Resource (HP-HR)
Practices: 20 years of experience
Inchniowski
and Shaw: Innovative Human
Resource Practices
Batt,
Colvin and Keefe: High Commitment
Human Resource Practices
Verma
and Fang: High Involvement Human
Resource Practices
High Performance Human Resource (HP-HR)
Practices: 20 years of experience
Production
problem solving teams that maximize
horizontal information flows
Job rotation to build flexibility, team communication
Careful screening of workers down the job ladder to
identify team skills
Job security used to build incentives to invest in firm’s
future
Training in problem solving, team skills
Incentive pay
Ichniowski
and Shaw (2003)
High Performance Human Resource (HP-HR)
Practices: 20 years of experience
Compare to Traditional Human Resource Practices
Wage and salary only loosely tied to performance
Narrowly defined jobs
Limited screening for nonmanagerial jobs
Tight supervision
Little training
Layoffs in slack times
Osterman (2000) reports that between 1992-1997
Proportion
using at least one HP-HR practice rose from 65% to 85%
Proportion using multiple HP-HR rose from 38% to 71%
High Performance Human Resource (HP-HR)
Practices: 20 years of experience
Group pay incentives have free rider problems
Use smaller groups to foster peer pressure,
mutual monitoring
Train on workplace norms
Combine with stronger screen on team work
at hiring
=>Multiple HP-HR methods make incentive
pay more successful
High Performance Human Resource (HP-HR)
Practices: 20 years of experience
Fostering
worker ideas to raise productivity
Requires
job security, or workers may fear job
loss from suggestions
Flexibility in job assignments makes commitment
to job security more credible.
Commitment to training makes commitment to
job security more credible.
=>Multiple HP-HR methods make
decentralized decision-making more successful
High Performance Human Resource (HP-HR)
Practices: 20 years of experience
When
employees are expected to multitask
Requires
combination of fixed compensation for
routine tasks
More complex compensation for innovatrive
activities
=>Multiple HP-HR methods make multitasking more successful
High Performance Human Resource (HP-HR)
Practices: 20 years of experience
Ichniowski,
Shaw and Prennushi (1997) American
Economic Review
Examine
industry
use of alternative HR practices in the steel
Innovative
HR system: labor productivity 6.7% higher
High teamwork: labor productivity 3.2% higher
High communication: labor productivity 1.4% higher
Reference is traditional HR
Note: Individual HR practices had no effect in
isolation—only in combination
Does
this mean profits higher with innovative HR?
High Performance Human Resource (HP-HR)
Practices: 20 years of experience
Ichniowski
and Shaw (2003) review evidence from
several studies. Higher returns from HP-HR also
found in
Nonluxury
auto assembly
Apparel manufacturing
Metalworking and machine shops
Customer service in communications
Scientists in Pharmaceuticals
BUT—not
all studies find positives
If positives not realized, companies change
practices—selection
These are not plug-in solutions
High Performance Human Resource (HP-HR)
Practices: 20 years of experience
Where
are innovative HR practices more common?
More
complex production processes (more scope for
returns)
New or newly reopened plants (more costly to convert
ongoing operations)
May be complementary with information technologies
Trace
sales back to team
Track efficiency, quality
Enhance accountability
Prevalence
in new plants makes it difficult to
disentangle HP-HR effects from other technologies
High Performance Human Resource (HP-HR)
Practices: 20 years of experience
NUMMI: New United Motor Manufacturing,
Inc.
GM plant built in Fremont CA, 1962
High absenteeism
Poor quality
Closed in 1982
High Performance Human Resource (HP-HR)
Practices: 20 years of experience
NUMMI: New United Motor Manufacturing, Inc.
Reopened in 1983: joint Toyota-GM venture
85% of former workers
HP-HR practices (teams, training, job flexibility,
decentralized decision-making, …)
Considered one of the most productive automobile plants in
the U.S. (my Toyota)
Is it HP-HR, new production methods, new management,
shock of plant closing, ….?
High Performance Human Resource (HP-HR)
Practices: 20 years of experience
Do
workers work differently in innovative HR
plants?
Surveys
of workers—whom do you communicate or
interact with?
In
innovative HR plants, workers
Interact with more workers, managers on their own line
Interact with more workers, managers on other lines
Broadened communication links appear to be
a major feature of HP-HR plants
HP-HR Practices with Unions
Role of unions in productivity
Shock
Exit-Voice
Tradeoff
Union
representation allows worker dissatisfaction
to be addressed, lessens turnover
Are
teams another voice mechanism?
Do
they lower turnover?
Batt, Rosemary, Alexander J. S. Colvin and Jeffrey Keefe.
“Employee Voice, Human Resource Practices, and Quit Rates:
Evidence from the Telecommunications Industry.” Industrial
and Labor Relations Review 55 (July 2002): 573-594.
Grievance mechanism (good sign) vs. Grievance use (bad sign)
Endogenous?
Alternative HR practices:
Reengineering vs. HP-HR
Batt, Rosemary, Alexander J. S. Colvin and Jeffrey Keefe.
“Employee Voice, Human Resource Practices, and Quit Rates:
Evidence from the Telecommunications Industry.” Industrial
and Labor Relations Review 55 (July 2002): 573-594.
VOICE:
presence
VOICE: rate
HP-HR
+
-
Reengineering
+
QUITS
Batt, Rosemary, Alexander J. S. Colvin and Jeffrey Keefe.
“Employee Voice, Human Resource Practices, and Quit Rates:
Evidence from the Telecommunications Industry.” Industrial
and Labor Relations Review 55 (July 2002): 573-594.
Table 2: Relationship between Union and use of HR mechanisms
Unions
less likely to have HP-HR system
More likely to have grievance procedure
More likely to use grievance procedure
Table 3: Empirical Model of Quits
HP-HR
lowers quit rate
Union lowers quit rate even more
Pay lowers quit rate
Reengineering raises quit rate
Table 4: Grievance rate does not significantly affect quits
Verma, Anil and Tony Fang. “Workplace Innovation and Union
Status: Synergy or Strife?” IRRA 55th Annual Proceedings.
(2003):189-198.
Table 2:
HP-HR raises pace of both product and process
innovations
Unions do not alter pace of innovations
Rubinstein, Saul A. “The Impact of Co-Management on Quality
Performance: The Case of the Saturn Corporation.” Industrial
and Labor Relations Review 53 (January 2000): 197-218.
Do unions enhance or limit HP-HR implementation?
Because unions foster communication among workers,
they may foster implementation of HP-HR programs
Rubinstein, Saul A. “The Impact of Co-Management on Quality
Performance: The Case of the Saturn Corporation.” Industrial
and Labor Relations Review 53 (January 2000): 197-218.
Union Leadership
Off-line
Labor Management
Committees
Union Membership
Problem Solving Teams
(Problem Resolution Circles)
(Decision Rings)
On-line
Partnering:
(Operating and Middle
Management)
Self-Directed Work Teams
Rubinstein, Saul A. “The Impact of Co-Management on Quality
Performance: The Case of the Saturn Corporation.” Industrial
and Labor Relations Review 53 (January 2000): 197-218.
Implementation at Saturn
New plant: Prior agreement to set up HP-HR between
UAW and GM
5,500
employees in about 700 Work teams
Teams organized into departments of ~100 employees each
Each department has two advisors, one from union and one
from management
1,100 union members have some sort of leadership
responsibility
Rubinstein, Saul A. “The Impact of Co-Management on Quality
Performance: The Case of the Saturn Corporation.” Industrial
and Labor Relations Review 53 (January 2000): 197-218.
Implementation at Saturn
Assignments
All
decisions by consensus
Union is a full partner in all business decisions
Joint management at al levels, department to corporate
With
20% of union members in some form of
leadership position, are horizontal and vertical information
flows enhanced?
Rubinstein, Saul A. “The Impact of Co-Management on Quality
Performance: The Case of the Saturn Corporation.” Industrial
and Labor Relations Review 53 (January 2000): 197-218.
Hypotheses
1.
2.
3.
4.
Information flows will differ between union and
nonunion managers
Quality will be improved in union managed sectors
due to improved communication, coordination and
problem-solving
Quality enhanced when there is a balance between
people and production management
Quality enhanced when union and nonunion
managers share common goals
Rubinstein, Saul A. “The Impact of Co-Management on Quality
Performance: The Case of the Saturn Corporation.” Industrial
and Labor Relations Review 53 (January 2000): 197-218.
Hypotheses
1.
2.
3.
4.
Information flows will differ between union and nonunion
managers (data on communications network)
Quality will be improved in union managed sectors due to
improved communication, coordination and problem-solving
Quality enhanced when there is a balance between people and
production management (time use survey of managers)
Quality enhanced when union and nonunion managers work
more closely (degree of agreement on goals between advisors)
Rubinstein, Saul A. “The Impact of Co-Management on Quality
Performance: The Case of the Saturn Corporation.” Industrial
and Labor Relations Review 53 (January 2000): 197-218.
Hypotheses
1.
Information flows will differ between union and nonunion
managers
Figure 2: Union advisors had denser communication networks
Union advisors spent more time on people problems, Nonunion
advisors spent more time on production problems
Better performing units devoted considerably more time to quality
issues vs other issues
Rubinstein, Saul A. “The Impact of Co-Management on Quality
Performance: The Case of the Saturn Corporation.” Industrial
and Labor Relations Review 53 (January 2000): 197-218.
Hypotheses 2-4
Table 4: Note small sample size!
Balance is ratio of time spent managing production vs
people. Measure reflects closeness to 0.5?
Alignment, union communications are tied to improved
quality, less so to initial quality level
Kleiner, Morris M., Jonathan S Leonard, and Adam M. Pilarski.
“How Industrial Relations Affects Plant Performance: The Case
of Commercial Aircraft Manufacturing.” Industrial and Labor
Relations Review 55 (January 2002): 195-218.
In defense of traditional HR….
Large airplane manufacturer
Long-time traditional (adversarial and sometimes militant)
relationship between union and firm
Monthly data 1974-1991 follow the producton of a new line of
commercial aircraft, redesigned in 1980
Inverse productivity measure: Actual relative to planned hours per
plane
Kleiner, Morris M., Jonathan S Leonard, and Adam M. Pilarski.
“How Industrial Relations Affects Plant Performance: The Case
of Commercial Aircraft Manufacturing.” Industrial and Labor
Relations Review 55 (January 2002): 195-218.
Over the period (Figure 1)
3 strikes
Work-to-rule slow down
6 union presidents
1-3 moderate
4 most militant, drives union into receivership
5 promised to work closely with management
6 promised to end Total Quality Management (TQM)
4 CEOs
1: traditional adversarial relationship with labor
2: Quality circles
3: TQM
4: Return to tight management, ended TQM
Kleiner, Morris M., Jonathan S Leonard, and Adam M. Pilarski.
“How Industrial Relations Affects Plant Performance: The Case
of Commercial Aircraft Manufacturing.” Industrial and Labor
Relations Review 55 (January 2002): 195-218.
Table 2:

Concerted actions cost productivity


Takes 1-4 months to return production to normal
Costs in lost production





Strike 1:
Strike 2:
Strike 3:
Work-to-Rule:
$2.7 million
$0.8 million
$14 million
$21 million
No gain from TQM, quality circles

Although labor productivity had started to rise by the end
of the TQM period
Kleiner, Morris M., Jonathan S Leonard, and Adam M. Pilarski.
“How Industrial Relations Affects Plant Performance: The Case
of Commercial Aircraft Manufacturing.” Industrial and Labor
Relations Review 55 (January 2002): 195-218.
Why the lack of return to HP-HR?




Ongoing plant—transaction costs for change
Initial implementation may lead to productivity losses
First-line supervisors feared loss of jobs
Some in the union saw TQM as a sell-out to
management
High Performance Human Resource (HP-HR)
Practices: 20 years of experience
Where
are innovative HR practices more
common?
More
complex production processes (more scope for
returns)
New
or newly reopened plants (more costly
to convert ongoing operations)
May
be complementary with information technologies