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Traditional Japanese performance
management system (PMS)
Model Employers: Committed long-term employmentsecurity and offered systematized training programs andperiodic opportunities for advancement in status and wagesto employees
Model Employees: Developed their careers within onefirm and shared interests and goals with their employers
Employees were assessed and their pay and promotionsdetermined by a scheme called the skill-grade system
Firms rarely staffed higher-level positions with external hires Japan is rather unique in that even unionized production
workers are also subject to merit assessments conducted bysupervisors
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Drawback of the traditional PMS
Traditional PMS focused mainly on only the
input aspect of employee performance: Most
importantly, skills and abilities
Not much effort to measure and evaluate
employee output
Simply focusing on employees inputs does not
necessarily identify productive and effectiveworkers (More true for white collar employees)
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Key Factors Impacting PMS in Japan
Historical factors: Already Discussed
Legal Factor: Japanese courts (Evident from variousrulings) have made it almost impossible for employersto terminate or lay off their regular-status employees
without the employees' (or their unions') consent. Impact of Government: Both long-term employment
and employment security are explicit policies of theJapanese government
Role of Unions: Japanese unions' accommodatingattitudes in wage negotiations have beencomplemented by their strong insistence onemployment security for their membership.
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Key Factors Impacting PMS in Japan
Impact of Globalization, Ageing workforce &
changes in the competitive environment
many employers have begun to question the
effectiveness of current HRM practices
As a result, following two trends are visible in the
current context:
Output-Based Evaluation and Individual Differentiation:The introduction of competitive appraisal practices which
emphasize individual performance and output
The externalization of core, regular-status employees
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Recent Trends in PMS in Japan
Output-Based Evaluation and Individual Differentiation:Eemployees are now evaluated on the basis of bothperformance and ability/competence Fuji Research Institute Survey (1998): Suggested that firms
assigned approximately 40% of the weight to performance and
about 25 to 26% to ability/competence. Tsuru, Morishima, and Okunishi (1998): 54.0% of the firms had
some type of pay-for-performance schemes for at least somesegment of their workforce.
The proportions was even higher for larger firms (65.8% in the
employment >5,000 category) and among manufacturing firms(61.0%)
Japan Institute of Labour(1997): The proportion of firmsintroducing individual differentials after the cohort had beenemployed for 5 to 10 years, had dropped to 33.1%
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Recent Trends in PMS in Japan
Externalization of Regular-Status, Core Employees :Some Japanese firms have started offering differentlevels of employment protection instead of traditionalLife Term Employment.
Japanese firms often use shukko and tensekito removeredundant workers from the company payroll
With Shukko, employees are temporarily lent to other companies
With Tenseki, their official employment status is permanentlychanged and they become employees of the receiving firms
Strategies to remove senior employees range from earlyvoluntary retirement to aggressive outplacementcounselling (called Katatataki)
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Recent Trends in PMS in Japan
Rising Concern with Procedural Justice : Thepsychological contract between Japanese employees andemployers has shifted from Relational to Transactional
Relational :The employee-employer linkage that existed in the
learning centered system Transactional: The new emerging model
Why Employees have become increasingly more concerned with the
procedural equity which their employers performancemanagement system is operated
Employees now demand for procedural fairness in evaluationpractices
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Points to be taken in mind while
designing PMS for Japanese subsidiary
Standardization with Indian PM System
Management-by-objectives approach to PMS
Completely fair & transparent system
Comprehensive Assessor & Assessee training on thePMS
Formal Mechanism for handling appeals andcomplaints
Criteria for Employee Evaluation to be Disclosed
Open to continuous feedback & subsequentmodification
Adopting an Enterprise Performance ManagementSystem interlinking Indian operation with Japanese
subsidiary
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Enterprise Performance Management System
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Proposed PMS System Overview
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Performance Appraisal Discussion Flow
Chart
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Performance Plan
Performance Report
Implement of operations and measures
Feed back!!
PlanDoCheck!!
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Welfare and Benefit Program to
support employees life events
Compensation for Accident
Childbirth, Childcare and Nursing Care SupportSystem
Asset Formation
Long-Term Service Awards
Marriage, Childbirth and Funeral grants andDisaster Support
Leisure Activity SupportHome Loan, Transfer/ Home Removal Support
Retirement Pension Plan
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Key features of proposed performance
management system (PMS)
Focused on continuous employee and organizational learning &developing intellectual skills: Learning of new skills and acquisitionof knowledge to be supported and encouraged
Internal Training and HRD to be considered as pivotal HRMfunctions: Extensive in-house training
Compensation practices designed to reward both: employeeperformance and skill development
Progressive policy designed to systematically discourage andeventually eliminate "life time" employment, seniority wage &promotion, enterprise unionism
Promote seikashugi orperformance-ism: Individual performance
to be used as one of the major determinant of employeescompensation
Frequent job assignment changes to develop organizational skills(Ability to effectively work within a firm, across divisions,departments, teams, and individual workers)
Other key skills are Communication and coordination skills &Quality Focus & Improvement