high performance human resource (hp-hr) practices: 20 years of experience inchniowski and shaw:...

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

experienceexperienceInchniowski and Shaw: Innovative Inchniowski and Shaw: Innovative Human Resource PracticesHuman Resource Practices

Batt, Colvin and Keefe: High Batt, Colvin and Keefe: High Commitment Human Resource Commitment Human Resource PracticesPractices

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


experienceexperienceProduction problem solving teams that Production problem solving teams that maximize horizontal information flowsmaximize horizontal information flowsJob rotation to build flexibility, team Job rotation to build flexibility, team communicationcommunicationCareful screening of workers down the job Careful screening of workers down the job ladder to identify team skillsladder to identify team skillsJob security used to build incentives to invest Job security used to build incentives to invest in firm’s futurein firm’s futureTraining in problem solving, team skillsTraining in problem solving, team skillsIncentive payIncentive pay

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


experienceexperienceCompare to Traditional Human Resource Compare to Traditional Human Resource PracticesPracticesWage and salary only loosely tied to Wage and salary only loosely tied to performanceperformanceNarrowly 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-Osterman (2000) reports that between 1992-19971997

Proportion using at least one HP-HR practice rose Proportion using at least one HP-HR practice rose from 65% to 85%from 65% to 85%Proportion using multiple HP-HR rose from 38% to Proportion using multiple HP-HR rose from 38% to 71%71%


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

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


experienceexperienceFostering worker ideas to raise Fostering worker ideas to raise productivityproductivity

Requires job security, or workers may Requires job security, or workers may fear job loss from suggestionsfear job loss from suggestionsFlexibility in job assignments makes Flexibility in job assignments makes commitment to job security more commitment to job security more credible.credible.Commitment to training makes Commitment to training makes commitment to job security more commitment to job security more credible.credible.

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


experienceexperienceWhen employees are expected to When employees are expected to multitaskmultitask

Requires combination of fixed Requires combination of fixed compensation for routine taskscompensation for routine tasksMore complex compensation for More complex compensation for innovatrive activitiesinnovatrive activities

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


experienceexperienceIchniowski, Shaw and Prennushi (1997) Ichniowski, Shaw and Prennushi (1997) AAmerican Economic Reviewmerican Economic Review

Examine use of alternative HR practices in Examine use of alternative HR practices in the steel industrythe steel industry

Innovative HR system: labor productivity Innovative HR system: labor productivity 6.7% higher6.7% higherHigh teamwork: labor productivity 3.2% High teamwork: labor productivity 3.2% higherhigherHigh communication: labor productivity High communication: labor productivity 1.4% higher1.4% higherReference is traditional HRReference is traditional HRNote: Individual HR practices had no effect Note: Individual HR practices had no effect in isolation—only in combinationin isolation—only in combination

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


experienceexperienceIchniowski and Shaw (2003) review Ichniowski and Shaw (2003) review evidence from several studies. Higher evidence from several studies. Higher returns from HP-HR also found inreturns from HP-HR also found 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 If positives not realized, companies change practices—selectionchange practices—selectionThese are not plug-in solutionsThese are not plug-in solutions


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

More complex production processes (more More complex production processes (more scope for returns)scope for 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 May be complementary with information technologiestechnologies

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

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


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


experienceexperienceNUMMI: New United Motor Manufacturing, NUMMI: New United Motor Manufacturing, Inc.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 HP-HR practices (teams, training, job

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

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

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


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

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

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

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

HP-HR Practices with HP-HR Practices with UnionsUnions

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

Union representation allows worker Union representation allows worker dissatisfaction to be addressed, lessens dissatisfaction to be addressed, lessens turnoverturnover

Are teams another voice Are teams another voice mechanism?mechanism?

Do they lower turnover?Do they lower turnover?

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

Grievance mechanism (good sign) vs. Grievance use Grievance mechanism (good sign) vs. Grievance use (bad sign)(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 Table 2: Relationship between Union and use of HR mechanismsmechanisms

Unions 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 Verma, Anil and Tony Fang. “Workplace Innovation and Union Status: Synergy or Strife?” Innovation and Union 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 HP-HR raises pace of both product and process innovationsprocess innovations

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

Rubinstein, Saul A. “The Impact of Co-Rubinstein, Saul A. “The Impact of Co-Management on Quality Performance: The Case Management on Quality Performance: The Case of the Saturn Corporation.” of the Saturn Corporation.” Industrial and Industrial and Labor Relations ReviewLabor Relations Review 53 (January 2000): 197- 53 (January 2000): 197-218.218.

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

Because unions foster communication Because unions foster communication among workers, they may foster among workers, they may foster implementation of HP-HR programsimplementation 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-New plant: Prior agreement to set up HP-HR between UAW and GMHR between UAW and GM

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


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 Joint management at al levels, department to corporatecorporate

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


HypothesesHypotheses

1.1. Information flows will differ between Information flows will differ between union and nonunion managersunion and nonunion managers

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

3.3. Quality enhanced when there is a Quality enhanced when there is a balance between people and production balance between people and production managementmanagement

4.4. Quality enhanced when union and Quality enhanced when union and nonunion managers share common goalsnonunion managers share common goals



1.1. Information flows will differ between union and Information flows will differ between union and nonunion managers (nonunion managers (data on communications data on communications

networknetwork))

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

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

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



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

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

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

Better performing units devoted considerably more Better performing units devoted considerably more time to quality issues vs other issuestime to quality issues 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 Balance is ratio of time spent managing production vs people. Measure reflects production vs people. Measure reflects closeness to 0.5?closeness to 0.5?

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

Kleiner, Morris M., Jonathan S Leonard, and Kleiner, Morris M., Jonathan S Leonard, and Adam M. Pilarski. “How Industrial Relations Adam M. Pilarski. “How Industrial Relations Affects Plant Performance: The Case of Affects Plant Performance: The Case of Commercial Aircraft Manufacturing.” Commercial Aircraft Manufacturing.” Industrial Industrial and Labor Relations Reviewand Labor Relations Review 55 (January 2002): 55 (January 2002): 195-218.195-218.In defense of traditional HR….In defense of traditional HR….

Large airplane manufacturerLarge airplane manufacturer

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

Monthly data 1974-1991 follow the producton of a Monthly data 1974-1991 follow the producton of a new line of commercial aircraft, redesigned in new line of commercial aircraft, redesigned in 19801980

Inverse productivity measure: Actual relative to Inverse productivity measure: Actual relative to planned hours per planeplanned hours per plane

Kleiner, Morris M., Jonathan S Leonard, and Kleiner, Morris M., Jonathan S Leonard, and Adam M. Pilarski. “How Industrial Relations Adam M. Pilarski. “How Industrial Relations Affects Plant Performance: The Case of Affects Plant Performance: The Case of Commercial Aircraft Manufacturing.” Commercial Aircraft Manufacturing.” Industrial Industrial and Labor Relations Reviewand Labor Relations Review 55 (January 2002): 55 (January 2002): 195-218.195-218.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 labor2: Quality circles2: Quality circles3: TQM3: TQM4: Return to tight management, ended TQM4: Return to tight management, ended TQM

Kleiner, Morris M., Jonathan S Leonard, and Kleiner, Morris M., Jonathan S Leonard, and Adam M. Pilarski. “How Industrial Relations Adam M. Pilarski. “How Industrial Relations Affects Plant Performance: The Case of Affects Plant Performance: The Case of Commercial Aircraft Manufacturing.” Commercial Aircraft Manufacturing.” Industrial Industrial and Labor Relations Reviewand Labor Relations Review 55 (January 2002): 55 (January 2002): 195-218.195-218.Table 2: Table 2:

Concerted actions cost productivityConcerted actions cost productivity Takes 1-4 months to return production to Takes 1-4 months to return production to

normalnormal 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 Although labor productivity had started to

rise by the end of the TQM periodrise by the end of the TQM period

Kleiner, Morris M., Jonathan S Leonard, and Kleiner, Morris M., Jonathan S Leonard, and Adam M. Pilarski. “How Industrial Relations Adam M. Pilarski. “How Industrial Relations Affects Plant Performance: The Case of Affects Plant Performance: The Case of Commercial Aircraft Manufacturing.” Commercial Aircraft Manufacturing.” Industrial Industrial and Labor Relations Reviewand Labor Relations Review 55 (January 2002): 55 (January 2002): 195-218.195-218.Why the lack of return to HP-HR?Why the lack of return to HP-HR?

Ongoing plant—transaction costs for Ongoing plant—transaction costs for changechange

Initial implementation may lead to Initial implementation may lead to productivity lossesproductivity losses

First-line supervisors feared loss of jobsFirst-line supervisors feared loss of jobs Some in the union saw TQM as a sell-out Some in the union saw TQM as a sell-out

to managementto management


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

More complex production processes (more More complex production processes (more scope for returns)scope for returns)New or newly reopened plants New or newly reopened plants (more costly to convert ongoing (more costly to convert ongoing operations)operations)May be complementary with information May be complementary with information technologiestechnologies

high performance human resource (hp-hr) practices: 20 years of experience inchniowski and shaw:...

Documents

job ladder

job assignments

job loss

team skills job security

multiple hphr methods

firms future job security

team skills training

team work