hpo hr

High Performance Human Resource (HP-HR) High Performance Human Resource (HP-HR) Practices: 20 years of experiencePractices: 20 years of experience

Inchniowski and Shaw: Innovative Human Inchniowski and Shaw: Innovative Human Resource PracticesResource Practices

Batt, Colvin and Keefe: High Commitment Batt, Colvin and Keefe: High Commitment Human Resource PracticesHuman Resource Practices

Verma and Fang: High Involvement Human Verma and Fang: High Involvement Human Resource PracticesResource Practices


Production problem solving teams that maximize Production problem solving teams that maximize horizontal information flowshorizontal information flowsJob rotation to build flexibility, team communicationJob rotation to build flexibility, team communicationCareful screening of workers down the job ladder to Careful screening of workers down the job ladder to identify team skillsidentify team skillsJob security used to build incentives to invest in firm’s Job security used to build incentives to invest in firm’s futurefutureTraining in problem solving, team skillsTraining in problem solving, team skillsIncentive payIncentive pay

Ichniowski and Shaw (2003)Ichniowski and Shaw (2003)


Compare to Traditional Human Resource PracticesCompare to Traditional Human Resource PracticesWage and salary only loosely tied to performanceWage and salary only loosely tied to performanceNarrowly defined jobsNarrowly defined jobsLimited screening for nonmanagerial jobsLimited screening for nonmanagerial jobsTight supervisionTight supervisionLittle trainingLittle trainingLayoffs in slack timesLayoffs in slack times

Osterman (2000) reports that between 1992-1997Osterman (2000) reports that between 1992-1997Proportion using at least one HP-HR practice rose from 65% to 85%Proportion using at least one HP-HR practice rose from 65% to 85%Proportion using multiple HP-HR rose from 38% to 71%Proportion using multiple HP-HR rose from 38% to 71%


Group pay incentives have free rider problemsGroup pay incentives have free rider problemsUse smaller groups to foster peer pressure, Use smaller groups to foster peer pressure, mutual monitoringmutual monitoringTrain on workplace normsTrain on workplace normsCombine with stronger screen on team work Combine with stronger screen on team work at hiringat hiring

=>Multiple HP-HR methods make incentive =>Multiple HP-HR methods make incentive pay more successfulpay more successful


Fostering worker ideas to raise productivityFostering worker ideas to raise productivityRequires job security, or workers may fear job Requires job security, or workers may fear job loss from suggestionsloss from suggestionsFlexibility in job assignments makes commitment Flexibility in job assignments makes commitment to job security more credible.to job security more credible.Commitment to training makes commitment to Commitment to training makes commitment to job security more credible.job security more credible.

=>Multiple HP-HR methods make =>Multiple HP-HR methods make decentralized decision-making more successfuldecentralized decision-making more successful


When employees are expected to multitaskWhen employees are expected to multitaskRequires combination of fixed compensation for Requires combination of fixed compensation for routine tasksroutine tasksMore complex compensation for innovatrive More complex compensation for innovatrive activitiesactivities

=>Multiple HP-HR methods make multi-=>Multiple HP-HR methods make multi-tasking more successfultasking more successful


Ichniowski, Shaw and Prennushi (1997) AIchniowski, Shaw and Prennushi (1997) American merican Economic ReviewEconomic Review

Examine use of alternative HR practices in the steel Examine use of alternative HR practices in the steel industryindustry

Innovative HR system: labor productivity 6.7% higherInnovative HR system: labor productivity 6.7% higherHigh teamwork: labor productivity 3.2% higherHigh teamwork: labor productivity 3.2% higherHigh communication: labor productivity 1.4% higherHigh communication: labor productivity 1.4% higherReference is traditional HRReference is traditional HRNote: Individual HR practices had no effect in isolationNote: Individual HR practices had no effect in isolation—only in combination—only in combination

Does this mean profits higher with innovative HR?Does this mean profits higher with innovative HR?


Ichniowski and Shaw (2003) review evidence from Ichniowski and Shaw (2003) review evidence from several studies. Higher returns from HP-HR also several studies. Higher returns from HP-HR also found infound in

Nonluxury auto assemblyNonluxury auto assemblyApparel manufacturingApparel manufacturingMetalworking and machine shopsMetalworking and machine shopsCustomer service in communicationsCustomer service in communicationsScientists in PharmaceuticalsScientists in Pharmaceuticals

BUT—not all studies find positivesBUT—not all studies find positivesIf positives not realized, companies change practicesIf positives not realized, companies change practices—selection—selectionThese are not plug-in solutionsThese are not plug-in solutions


Where are innovative HR practices more common?Where are innovative HR practices more common?More complex production processes (more scope for More complex production processes (more scope for returns)returns)New or newly reopened plants (more costly to convert New or newly reopened plants (more costly to convert ongoing operations)ongoing operations)May be complementary with information technologiesMay be complementary with information technologies

Trace sales back to teamTrace sales back to teamTrack efficiency, qualityTrack efficiency, qualityEnhance accountabilityEnhance accountability

Prevalence in new plants makes it difficult to Prevalence in new plants makes it difficult to disentangle HP-HR effects from other technologiesdisentangle HP-HR effects from other technologies


NUMMI: New United Motor Manufacturing, NUMMI: New United Motor Manufacturing, Inc.Inc.

GM plant built in Fremont CA, 1962GM plant built in Fremont CA, 1962

High absenteeismHigh absenteeism

Poor qualityPoor quality

Closed in 1982Closed in 1982


NUMMI: New United Motor Manufacturing, Inc.NUMMI: New United Motor Manufacturing, Inc.

Reopened in 1983: joint Toyota-GM ventureReopened in 1983: joint Toyota-GM venture85% of former workers85% of former workersHP-HR practices (teams, training, job flexibility, HP-HR practices (teams, training, job flexibility,

decentralized decision-making, …)decentralized decision-making, …)

Considered one of the most productive automobile plants in Considered one of the most productive automobile plants in the U.S. (my Toyota)the U.S. (my Toyota)

Is it HP-HR, new production methods, new management, Is it HP-HR, new production methods, new management, shock of plant closing, ….?shock of plant closing, ….?


Do workers work differently in innovative HR Do workers work differently in innovative HR plants?plants?

Surveys of workers—whom do you communicate or Surveys of workers—whom do you communicate or interact with?interact with?

In innovative HR plants, workers In innovative HR plants, workers Interact with more workers, managers on their own lineInteract with more workers, managers on their own lineInteract with more workers, managers on other linesInteract with more workers, managers on other lines

Broadened communication links appear to be Broadened communication links appear to be a major feature of HP-HR plantsa major feature of HP-HR plants

HP-HR Practices with UnionsHP-HR Practices with Unions

Role of unions in productivityRole of unions in productivityShockShockExit-Voice TradeoffExit-Voice Tradeoff

Union representation allows worker dissatisfaction Union representation allows worker dissatisfaction to be addressed, lessens turnoverto be addressed, lessens turnover

Are teams another voice mechanism?Are teams another voice mechanism?Do they lower turnover?Do they lower turnover?

Batt, Rosemary, Alexander J. S. Colvin and Jeffrey Keefe. Batt, Rosemary, Alexander J. S. Colvin and Jeffrey Keefe. “Employee Voice, Human Resource Practices, and Quit Rates: “Employee Voice, Human Resource Practices, and Quit Rates: Evidence from the Telecommunications Industry.” Evidence from the Telecommunications Industry.” Industrial Industrial and Labor Relations Reviewand Labor Relations Review 55 (July 2002): 573-594. 55 (July 2002): 573-594.

Grievance mechanism (good sign) vs. Grievance use (bad sign)Grievance mechanism (good sign) vs. Grievance use (bad sign)

Endogenous?Endogenous?

Alternative HR practices:Alternative HR practices:

Reengineering vs. HP-HRReengineering vs. HP-HR


VOICE: presence

HP-HR

Reengineering

QUITS

-

-

+

VOICE: rate +


Table 2: Relationship between Union and use of HR mechanismsTable 2: Relationship between Union and use of HR mechanismsUnions less likely to have HP-HR systemUnions less likely to have HP-HR systemMore likely to have grievance procedureMore likely to have grievance procedureMore likely to use grievance procedureMore likely to use grievance procedure

Table 3: Empirical Model of QuitsTable 3: Empirical Model of QuitsHP-HR lowers quit rateHP-HR lowers quit rateUnion lowers quit rate even moreUnion lowers quit rate even morePay lowers quit ratePay lowers quit rateReengineering raises quit rateReengineering raises quit rate

Table 4: Grievance rate does not significantly affect quitsTable 4: Grievance rate does not significantly affect quits

Verma, Anil and Tony Fang. “Workplace Innovation and Union Verma, Anil and Tony Fang. “Workplace Innovation and Union Status: Synergy or Strife?” Status: Synergy or Strife?” IRRA 55th Annual ProceedingsIRRA 55th Annual Proceedings. . (2003):189-198.(2003):189-198.

Table 2: Table 2:

HP-HR raises pace of both product and process HP-HR raises pace of both product and process innovationsinnovations

Unions do not alter pace of innovationsUnions do not alter pace of innovations

Rubinstein, Saul A. “The Impact of Co-Management on Quality Rubinstein, Saul A. “The Impact of Co-Management on Quality Performance: The Case of the Saturn Corporation.” Performance: The Case of the Saturn Corporation.” Industrial Industrial and Labor Relations Reviewand Labor Relations Review 53 (January 2000): 197-218. 53 (January 2000): 197-218.

Do unions enhance or limit HP-HR implementation?Do unions enhance or limit HP-HR implementation?

Because unions foster communication among workers, Because unions foster communication among workers, they may foster implementation of HP-HR programsthey may foster implementation of HP-HR programs


Union Leadership Union Membership

Off-line

On-line

Labor Management Committees

(Decision Rings)

Problem Solving Teams

(Problem Resolution Circles)

Partnering:

(Operating and Middle Management)

Self-Directed Work Teams


Implementation at SaturnImplementation at SaturnNew plant: Prior agreement to set up HP-HR between New plant: Prior agreement to set up HP-HR between UAW and GMUAW and GM

5,500 employees in about 700 Work teams 5,500 employees in about 700 Work teams Teams organized into departments of ~100 employees eachTeams organized into departments of ~100 employees eachEach department has two advisors, one from union and one Each department has two advisors, one from union and one from managementfrom management1,100 union members have some sort of leadership 1,100 union members have some sort of leadership responsibilityresponsibility


Implementation at SaturnImplementation at SaturnAssignmentsAssignments

All decisions by consensusAll decisions by consensusUnion is a full partner in all business decisionsUnion is a full partner in all business decisionsJoint management at al levels, department to corporateJoint management at al levels, department to corporate

With 20% of union members in some form of With 20% of union members in some form of leadership position, are horizontal and vertical information leadership position, are horizontal and vertical information flows enhanced?flows enhanced?


HypothesesHypotheses

3.3. Information flows will differ between union and Information flows will differ between union and nonunion managersnonunion managers

4.4. Quality will be improved in union managed sectors Quality will be improved in union managed sectors due to improved communication, coordination and due to improved communication, coordination and problem-solvingproblem-solving

5.5. Quality enhanced when there is a balance between Quality enhanced when there is a balance between people and production managementpeople and production management

6.6. Quality enhanced when union and nonunion Quality enhanced when union and nonunion managers share common goalsmanagers share common goals



n Information flows will differ between union and nonunion Information flows will differ between union and nonunion managers (managers (data on communications networkdata on communications network))

n Quality will be improved in union managed sectors due to Quality will be improved in union managed sectors due to improved communication, coordination and problem-solving improved communication, coordination and problem-solving

n Quality enhanced when there is a balance between people and Quality enhanced when there is a balance between people and production management production management (time use survey of managers)(time use survey of managers)

n Quality enhanced when union and nonunion managers work Quality enhanced when union and nonunion managers work more closely more closely (degree of agreement on goals between advisors)(degree of agreement on goals between advisors)



3.3. Information flows will differ between union and nonunion Information flows will differ between union and nonunion managersmanagers

Figure 2: Union advisors had denser communication networksFigure 2: Union advisors had denser communication networks

Union advisors spent more time on people problems, Nonunion Union advisors spent more time on people problems, Nonunion advisors spent more time on production problemsadvisors spent more time on production problems

Better performing units devoted considerably more time to quality Better performing units devoted considerably more time to quality issues vs other issuesissues vs other issues


Hypotheses 2-4Hypotheses 2-4

Table 4: Note small sample size!Table 4: Note small sample size!

Balance is ratio of time spent managing production vs Balance is ratio of time spent managing production vs people. Measure reflects closeness to 0.5?people. Measure reflects closeness to 0.5?

Alignment, union communications are tied to improved Alignment, union communications are tied to improved quality, less so to initial quality levelquality, less so to initial quality level

Kleiner, Morris M., Jonathan S Leonard, and Adam M. Pilarski. Kleiner, Morris M., Jonathan S Leonard, and Adam M. Pilarski. “How Industrial Relations Affects Plant Performance: The Case “How Industrial Relations Affects Plant Performance: The Case of Commercial Aircraft Manufacturing.” of Commercial Aircraft Manufacturing.” Industrial and Labor Industrial and Labor Relations ReviewRelations Review 55 (January 2002): 195-218. 55 (January 2002): 195-218.

In defense of traditional HR….In defense of traditional HR….

Large airplane manufacturerLarge airplane manufacturer

Long-time traditional (adversarial and sometimes militant) Long-time traditional (adversarial and sometimes militant) relationship between union and firmrelationship between union and firm

Monthly data 1974-1991 follow the producton of a new line of Monthly data 1974-1991 follow the producton of a new line of commercial aircraft, redesigned in 1980commercial aircraft, redesigned in 1980

Inverse productivity measure: Actual relative to planned hours per Inverse productivity measure: Actual relative to planned hours per planeplane


Over the period (Figure 1)Over the period (Figure 1)3 strikes3 strikesWork-to-rule slow downWork-to-rule slow down6 union presidents6 union presidents

1-3 moderate1-3 moderate

4 most militant, drives union into receivership4 most militant, drives union into receivership5 promised to work closely with management5 promised to work closely with management6 promised to end Total Quality Management (TQM)6 promised to end Total Quality Management (TQM)

4 CEOs4 CEOs1: traditional adversarial relationship with labor1: traditional adversarial relationship with labor

2: Quality circles2: Quality circles3: TQM3: TQM4: Return to tight management, ended TQM4: Return to tight management, ended TQM


Table 2: Table 2: Concerted actions cost productivityConcerted actions cost productivity

Takes 1-4 months to return production to normalTakes 1-4 months to return production to normal Costs in lost productionCosts in lost production

Strike 1:Strike 1: $2.7 million$2.7 million Strike 2:Strike 2: $0.8 million$0.8 million Strike 3:Strike 3: $14 million$14 million Work-to-Rule:Work-to-Rule: $21 million$21 million

No gain from TQM, quality circlesNo gain from TQM, quality circles Although labor productivity had started to rise by the end Although labor productivity had started to rise by the end

of the TQM periodof the TQM period


Why the lack of return to HP-HR?Why the lack of return to HP-HR?

Ongoing plant—transaction costs for changeOngoing plant—transaction costs for change Initial implementation may lead to productivity lossesInitial implementation may lead to productivity losses First-line supervisors feared loss of jobsFirst-line supervisors feared loss of jobs Some in the union saw TQM as a sell-out to Some in the union saw TQM as a sell-out to

managementmanagement


Where are innovative HR practices more Where are innovative HR practices more common?common?

More complex production processes (more scope for More complex production processes (more scope for returns)returns)

New or newly reopened plants (more costly New or newly reopened plants (more costly to convert ongoing operations)to convert ongoing operations)May be complementary with information technologiesMay be complementary with information technologies

hpo hr

Business

individual hr practices

multiple hphr methods

innovative hr practic

traditional hr note

years of experience

higher high communication

years of experience

higher high teamwork