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MYTHS ABOUT PEOPLE AT WORK:
A CRITIQUE OF HUMAN-RESOURCE MANAGEMENT
MYTHS ABOUT HUMAN- RESOURCE MANAGEMENT
1. LARGE ORGANIZATIONS PRACTICE HUMAN-RESOURCE
PLANNINGA new breed of human -resource specialist has emerged in the last few years, "the human-
resource planner" complete with a professional society, annual meetings and an academic
journal. Human-resource planning connects the human-resource systems—recruitment,
training and promotion—to long-range organizational strategy. Through planning, the
appropriate human resources should be on hand to meet changing organizational
requirements in the future. An explicit advantage of this discipline is to minimize shocks on
organizational members caused by planned changes: technology, products and markets. Two
big problems confront this myth, one conceptual and the other mundane. In the first place, the
United States is, at least to some extent, a market economy, not a government-planned
economy. Individual firms reap the fruits of their comparative economic advantages and
suffer the consequences of economic miscalculations as well. The recent experience of the
gigantic Chrysler Corporation demonstrates the futility of workers relying on corporate
viability as protection for their jobs, salaries or pensions. However, owners and managers of
large firms long ago figured out how to deal with uncertainty in the product market. Chandler
in his recent book The Visible Hand describes, for example, how the Dupont family decided
against trying to monopolize the market for explosives. Since only 70% of product demand
could be counted upon through economic downturns as well as boom times, the company
decided explicitly never to seek a larger share. Rather Dupont and all other monopolists or
oligopolists have left the remaining thirty percent to smaller firms who prosper in good times
and suffer in bad.
Piore has formulated a general proposition relevant to human resource planning. Large firms,
he argues, leave the uncertain fluctuations in demand to small firms who in turn provide
unstable, generally demeaning work to the disadvantaged groups in the society: women,
minorities and the young. These jobs offer low pay, little training, no promotion, arbitrary
discipline and constitute the "secondary" labour-market. By contrast, the larger firms satisfy
the constant demand (70%) in the industry and provide "primary" labour market jobs.
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Primary jobs offer better pay, training on the job, some advancement and due-process
protection against arbitrary discipline. At the most general level then, the planning of human-
resource opportunities for workers is the consequence of product market decisions made by a
number of employers more or less independently in order to deal with uncertainty in the
product market and maximize return on their investment. Such decisions are not in the
control of one firm. Thus human-resource planning in a capitalistic market economy is a
contradiction.
The second problem with the myth of human-resource planning is more mundane; it just
doesn't amount to much in practice. Two years ago, we studied the human resource planning
efforts of three large private sector employers. Smokescreen. Financial considerations
dominated the long-range planning effort in each of the three firms. The human-resource
considerations in two of the three were strictly secondary, despite their reputations for
sophistication in this field. For example, in one company, if divisional human-resource
projection failed to conform to the financial projections of corporate managers, the planning
staff simply changed their numbers at corporate headquarters. The new numbers never sifted
back to the divisions, so it is difficult to imagine how much the final "human-resource plan"
affected operations. In the second firm, the financial plan preceded the human-resource plan
each year, so the financial estimates dominated subsequent human-resource projections. The
third firm, to its credit, gave substantial power to its human-resource staff, but again financial
considerations predominated.
2. JOB EVALUATION PLANS DETERMINE OBJECTIVELY HOW
MUCH THE HOLDER OF A GIVEN JOB SHOULD BE PAIDLike so many other human-resource management systems, job evaluation blossomed under
government pressure during World War II. Salaries had to be set without allowing workers to
earn as much money as their labour power could earn during a war-induced, full-employment
economy. Various systems for assigning value points to jobs based on job characteristics
factors such as responsibility, effort and skill emerged. Today they still determine in an
allegedly objective way how much a given job is worth. Of course, the pay of a specific
worker in such a plan depends on other facts such as his or her time on the job. The best-
known job evaluation system is the main product of a large- consulting firm of the same
name, Hay Associates. The scientific basis of this system is the more or less durable
psychological finding that workers only notice about a 15% change in salary. Smaller
differences are not much noticed. Therefore, all the complicated steps and grades in the Hay
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System are based on 15% increments. The fallacy in the Hay reasoning is apparent. Here is a
system designed to measure objective job content, but based on workers' subjective
perceptions. Therein lays the empirical refutation of the job-evaluation myth. At bottom, the
plans reflect, as accurately as possible, the shared norms in a given culture generation,
community or ethnic group about the relative importance or value of different jobs. No
competent job-evaluation practitioner would present to management proposed pay plan
without testing it and modifying against the opinions and feelings of the workers. Indeed, a
committee serves exactly that purpose in the Hay System. Eliot Jaques makes this subjective,
cultural basis of job evaluation explicit in his own system of job evaluation.
The next few years promise a dramatic defence of job evaluation as specialists attempt to
conceal the subjective nature of their craft from the Equal Employment Opportunity
Commission. The Commission is worried because the subjective norms of our culture have
always assigned higher value to male jobs than to female jobs. To cite a recent court case,
janitors in a hospital earned more on a job-evaluation plan than did nurses women. Because
of the "objective" nature of the salary plan, the Court upheld the pay differential. Therefore,
job evaluation simply reutilizes cultural, often discretionary, stereotypes of what given jobs
are worth. It is a conservative influence that as often contradicts as reflects the supply and
demand of labour for the different occupations as the example of nurses confirms; nationally
they are in short supply. It is pseudoscience at best.
3. LARGE EMPLOYERS RECRUIT WIDELY FOR THE BEST PEOPLE
AVAILABLEStaggering arrays of institutional mechanisms support this myth. Want ads advertise jobs in
the newspapers; state employment agencies maintain banks of job openings; indeed, welfare
recipients can lose their benefits if they fail to consult job banks. Of course, the facts of
recruiting contradict this myth. Anyone who has ever looked for or filled a job knows the
reality. Only the most difficult jobs to fill ever get such wide publicity—the lowest-paid,
most menial jobs and the highest-paid, most prestigious positions. Almost all jobs in business
are filled by informal means—word of mouth, personal contacts, and special school-
employer relationships built up over time. An interview with a Dupont plant manager in
yesterday's Wall Street Journal summed up the philosophy of U.S. employers: "We hire the
best employees we can find and their families ". If we assume the ail-American family of
four, then that's three informal references to one wide search.
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If we extrapolate Piore's distinction between primary and secondary labour markets into the
firm, we find an internal labour market. The market within the organization determines how
most jobs are filled by large employers. They are filled from among current employees
according to well-known, usually formalized rules. For example, machine operators are
promoted from expeditors; setup men for several machines are promoted from current
operators. However, internal labour markets only display such vertical movement by
promotion in the primary labour market. In the secondary labour market hotels, dry cleaners,
temporary office agencies, etc. there is little promotion or upward mobility. Jobs exist at one
level and are filled externally. Thus the reality of recruiting is a closed and highly structured
process, except for the least attractive jobs. So reality contradicts the recent rash of books and
training programs on how to quit and move to a better job. To their credit, some consultants
provide an accurate description of the recruiting process and counsel their participants to
keep away from want ads and the employment agencies. They suggest, more realistically, the
cultivation of informal contact with people where jobs may open up in the future. However,
the contradiction between their description of reality and their purpose is clear. The United
States is not an open market for labour. The best predictor of the job you will have next is the
job you have now.
4. PSYCHOLOGICAL TESTING ALLOWS THE SELECTION OF THE
BEST PERSON FOR THE JOBThe mainstay of industrial psychology—that is psychologists serving large work
organizations—is the development and administration of standardized tests of ability and
personality to select from many job applicants the successful candidate. Such testing
originated—again like many personnel practices—in support of the federal government's war
efforts, in this case selecting draftees for World War I.
The most sophisticated example of selection testing is the assessment centre for managerial
candidates pioneered in the private sector by AT&T, but modelled on the Office of Strategic
Services method for picking spies in World War II. The assessment centre is a battery of tests
—written and behavioural lasting several days and tailored in most cases to picking
candidates who closely resemble successful managers in the organization where it is applied.
By contrast, the most simple-minded form of testing relies on general psychological tests to
determine "suitability" for top management positions. For example, the Thematic
Apperception Test purports to reveal deep-seeded personality characteristics through the
interpretation of ambiguous pictures. At present, very few large employers rely heavily on
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such tests, for the most compelling of reasons. With rare exceptions, they don't work. The
Equal Employment Opportunity Commission nearly eliminated this human-resource
management system by requiring some evidence of its results. In the past, few employers
bothered to check whether their testing programs selected applicants who performed any
better on the job than applicants who failed the test. The dependable result of many tests was
the selection of fewer blacks, females and Spanish-speaking Americans. The reasons for such
discriminatory impact are multiple and poorly understood, but the result from the employer's
perspective was a relatively homogeneous workforce in the permanent jobs and the
assignment of minority groups to jobs with low pay and undesirable working conditions.
Although the reasons are poorly understood, they certainly include some elements of racism
and sexism in employer stereotypes of the economic value of different workers.
Psychological research had questioned the fundamental assumptions of employment testing
long before the government intervened. Walter Mischel, a Stanford Professor, reviewed all
the evidence available in the mid-60' s and concluded that personality tests rarely predicted
specific behaviour in any situation, even the most trivial.
Despite the preponderance of evidence many industrial psychologists to this day use such
personality tests to advise employers in the selection of top managers. There the risks of
exposure and lawsuits are small given the individual nature of the application. By contrast,
the threat of class-action suits based on the requirement for evidence of differences in job
performance laid down by the Supreme Court decision in Griggs vs. Duke Power has
terminated most widespread testing at lower levels. The assessment centre almost alone has
withstood the scrutiny of the courts. When AT&T had to modify almost all its job selection
practices in a consent decree resulting from charges of race and sex discrimination, the court
accepted AT&T's evidence for the validity of the assessment centre.
The reasons for the centres’ ability to predict success for managers are clear. The centre is an
accurate simulation of a wide range of behaviours—leading group discussions, processing
mail and telephone calls, interviewing—specifically modelled on managers currently
succeeding in the organization in question. As Mischel’s review suggested, such close
simulations predict behaviour most effectively. What remains to be challenged is whether the
behaviour of existing managers is somehow desirable or related to the economic success of
the firm. That topic will be discussed in the section on performance appraisal.
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5. NEVER HIRE ANYBODY WITHOUT AN INTERVIEW—FACE-TO-
FACE CONTACT IS THE BEST TEST OF CHARACTERA special word must be said about the employment interview as a form of test for a potential
job applicant. The word is "poppycock". There is no evidence that the typical manager or
personnel department clerk can learn anything about job applicants in an interview that will
predict their success on the job. Reviews of the massive evidence in support of this
proposition are prepared every few years. Nonetheless the practice persists. The reasons for
interviewing a potential subordinate are obvious, but have nothing to do with job
performance. An interview allows the boss to determine if he or she would enjoy working
with the applicant. Do they share common interests, hobbies, philosophies about the job? In
addition, much like a dog urinating to mark its territory, the interview makes clear, from the
onset, the power relationship between the boss and the subordinate. Such a personal power
relationship lasts as long as the people work in the same organization. In fairness to the
discipline of industrial psychology, it must be mentioned that interviews can be used to
predict job performance. However, the process requires the same detailed development of
specific, questions as do assessment centres and computer analysis of the results. As a
consequence, interviewers are rarely if ever used in this professional manner.
6. TRAINING PREPARES PEOPLE TO SUCCEED AT JOBSTraining, especially for managers and technical workers, is a multibillion dollar industry. The
exact total is difficult to estimate because few employers account for the total costs of
training. Rarely for example, do they include the salaries of participants in the cost of
training? However, repeated studies by labour economists show that people learn their skills
on the job and not in training. Even employees' estimates of the skills learned in school and
training certainly inflated to justify the time and money spent in the effort rarely approach
50%. Indeed, most explanations of the failure of the Great Society's training programs for the
disadvantaged rest on the marginal impact of training. The way to develop the skills of the
disadvantaged—according to both liberals and conservatives—is to get them real jobs where
they can develop their skills. Techniques to accomplish this end vary: some economists
favour incentives to private employers; other emphasizes affirmative action. But the
implication is the same. Training does not prepare people for jobs, jobs prepare people for
jobs.
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Another mundane fact supports this grand conceptual insight. Employers rarely try to assess
the economic payoff of training. At best, they ask the participants if they enjoyed the training.
I have never in practice found a training program's costs evaluated against its impact on
production costs or sales revenues. Such assessments occasionally appear in the academic
research, usually with the qualification that the research was not part of the employer's
decision-making process.
7. PERFORMANCE APPRAISAL IS NECESSARY TO REWARD
EFFECTIVE WORKERSPerformance appraisal, according to my colleague Ed Schein (1978), means employer
practices designed to 1) describe worker behaviour on the job, 2) compare the behaviour to
some standard of acceptability, and 3) evaluate the behaviour as meeting, failing, or
exceeding the standard. Most frequently it involves a yearly interview by a manager with his
or her subordinates to review the subordinates' behaviour (rarely the manager's), based on a
written form provided by the personnel department. The results of the appraisal are used, to
varying degrees, to determine the subordinates salary increases, chances for promotion,
career plans, and areas for performance improvement. Like most of the human-resource
systems described in this paper, performance appraisal supports an array of consultants who
advise managers on how to overcome their own fears and subordinate's resistance to this
process. Some counsel separation of salary judgements from performance feedback; others
develop specific questionnaires to describe subordinate performance; all tinker with the
system rather than questioning its assumptions. The fundamental assumption of performance
appraisal is false: there is no such thing as objective performance which can be described,
much less appraised. This is not a new assertion. Of all the unlikely places, Harvard Business
School supported a study in the 1950's which concluded that performance or what the authors
called "productivity" was a political concept. Performance is the judgement a manager
applies to a subordinate. It has no meaning apart from that power relationship. As attest of the
proposition, the reader should ask any manager to appraise his or her own performance. He or
she will immediately begin to waffle, citing the ambiguous nature of his or her responsibility
and the difficulty in connecting specific results with their actions. Recurring surveys of
workers—managers and non-managers alike—reveal that 75% feel their performance is
above average. It is extremely difficult for two managers to agree on the relative performance
ratings of the same individual. My own attempt to measure the extent of agreement took
place in a small 135 people high-techno logy job shop where everybody knew everybody
Page | 7
else. I asked two managers who felt comfortable with their knowledge of each particular
workers' job activities to rate the worker's performance. The correlation was .16 indicating
that knowing one manager's rating would improve on a random guess of the other manager's
rating by 2%. Such results are common, even in highly-structured research projects. The
ways organizations cope with this conflict between the assumptions of performance appraisal
and reality are two-fold. First, they have groups of managers meet to reach a "consensus"
about an individual worker's performance. As anyone who has participated in such meetings
can testify, they quickly degenerate into explicitly political horse-trading over those
judgements that really matter—promotions, extra salary increases, layoffs. (Most assessments
are non-controversial as will be discussed in the section on merit salary increases). The
critical factor is not how the person performs but how influential his or her sponsor is relative
to other managers. The other tactic used by organizations to show up performance appraisal
is to gather multiple measures of the results of an employee's efforts during the year.
Professors' publications are counted as are engineers' patents, and a managers' unit may
generate a hundred separate descriptions—profit, total cost, cost per transaction, accidents,
etc. Industrial psychologists have for mailed this distinction between behaviour what the
manager, for example, actually does, such as who he or she talks to, how long they talk, what
is said performance the organization's assessment of the behaviour) and effectiveness (the
actual impact of behaviour on results the organization values, such as profit, sales revenue
etc. The authors concluded that a large number of factors outside the manager's control
influence effectiveness, other than his or her behaviour. Examples might include economic
conditions, supplies, and strikes. The list varies by job, but is endless. Therefore, using
measures of effectiveness without considering outside factors is a meaningless assessment of
individual behaviour. In practice, multiple measures of performance are used in the same
political assessment described above. Managers emphasize the specific effectiveness
measures that support their subjective assessment of the subordinate under review. An
interesting example of the results of such juggling of effectiveness measures can be found
each year when Business Week compares the raises granted to chief executives of private
companies with the change in profits for their firms. Invariably there is little or no
connection. The respective boards of directors must be able to find some measures of
effectiveness in their performance appraisal reviews to justify the bonuses. What is the effect
of performance appraisals in action? Sennett and Cobb, 1972, two radical sociologists, have
summarized the impact of systems designed to reward individual performance on those who
are evaluated negatively. Since the system is described as meritocratic, failure is accepted by
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the worker as his or her own personal fault. There is no resentment of the evaluation system,
as might be expected for an explicitly arbitrary system such as inheritance of positions or
promotion based on the college attended. As a consequence, Sennett and Cobb find deep
seated frustration, self-hate and resentment of one's own family in blue collar workers
underlying the superficial expressions of job satisfaction found in most attitude surveys.
(Usually about 70% of any group of workers will say they are satisfied with their job or
would take the same job if they had it all to do over again) But what about the winners in this
political lottery? Since the system is meritocratic, there must be something about them and
what they do on the job that sets them apart from those people who do not get promoted (or,
get large salary increases or get special training). Indeed, one might argue that peace of mind
for a successful manager depends on his/her retrospectively to impute personal causality to
essentially random events or political connections. Rather than encouraging identification
with other workers or raising questions about the legitimacy of the current organizational
distribution of power and resources, performance appraisal systems insure that upwardly-
mobile managers believe profoundly in both the fairness of the system and their own right to
control it.
8. MERIT SALARY PLANS REWARD TOP PERFORMERSMerit salary refers to the practice of giving workers (usually managers and other
nonunionized people) different sized pay raises (usually each year) to reward them for
performance. The alternative is a straight across-the board increase for all workers (usually as
a percentage of base pay, but sometimes a fixed dollar amount). The latter case may result
from union contracts geared to prevent high-paid workers from increasing their advantage
over the low-paid workers). Given the preceding discussion about performance as a political
concept, it's clear that there's less to merit salary than meets the eye. In fact, Fred Foulkes,
while he was at Harvard Business School, surveyed large non-union companies (many of
whom advocate merit salary) and his findings support a cynical conclusion. In almost all
cases, merit salary plans include an implicit cost-of-living increase for all workers. In
addition, the difference between the highest and lowest salary increase is usually trivial. Plus
or minus 2% is a typical spread. If 2% of 15,000 is $300 and a reasonable estimate of federal
and state taxes is 20% at that level, then the annual after tax difference between high and low
performances is $240. On a monthly basis, merit salary means $20, ($5) a week would
separate the best and the worst performer: that's two dollars and change between the best and
the average. In fact, almost all workers get the average. Such small differences in merit raises
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increases testify to the lack of confidence managers have in their own ability to distinguish
objective performance differences among their subordinates. Another testimonial is the
passionate, often paranoid refusals of most large employers to allow workers to know what
salary increases are given. Ed Lawler of the University of Southern California, the best
known psychological expert on the administration of salary plans, argues strongly for
organizations to make their salary decisions public. How else an organization can motivate
performance with salary, he asks, unless it pays major differences in the size of salary
increases between high and low performers and makes these decisions public. How else
indeed? The failure of companies especially non-union companies who are free to act without
the constraint of a union to make such distinctions, or even to let workers know their
respective salaries r supports the argument made in the last section. Performance differences
are political and therefore controversial. By keeping so-called "merit" salary increases secret,
managers avoid controversy. They also preserve the conservative impact on organizational
stability that was described above for performance appraisal. To wit, a worker who gets a
raise feels he or she earned it as an individual. Pay secrecy keeps him or her from realizing
that most other people are getting the same (or nearly the same) increase; and he or she exults
in their exceptional—and individual—merit.
9. PROMOTIONS ARE FROM WITHINMost large employers pride themselves on promoting people from within the ranks of current
workers. The advantages of this practice and image in terms of worker commitment and
loyalty to the organization are obvious. What is less obvious are the major restrictions placed
on promotion in all large employers? In a recent survey we conducted of management
development practices in large private sector employees in the U.S., I was most impressed by
the absence of promotion from within. What those words had always conjured up was the
image of the bank teller rising from the ranks to become president. While there exist a few,
very highly publicized examples of such movement from the bottom of the organization to
the top, the regular practices of hiring, assignment and promotion in large organizations
prevent such mobility. Typically organizations promote managers from two sources,
depending on the job to be filled. First -level managers—usually called foremen (even when
they're women) or supervisors—are promoted from among the highest skilled, highest paid
workers to be supervised. Such blue collar workers are almost never promoted more than one
or two levels into the managerial hierarchy. Moreover, given traditional job structures, the
holders of most jobs will never be promoted to the high skill, high pay jobs from which
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supervisors are promoted. Again Piore and his colleague Peter Doeringer have provided the
best description of the rules for job assignment which limit promotion opportunities for most
blue-collar workers. Figure I describe such an internal labour market. People assigned to
different job hierarchies, either at or shortly after hiring, and those hierarchies largely
determine who will acquire skills and, in the present context, become eligible for promotion
to first level management. However, a second, and in some ways even more pernicious
practice, limits promotion from within. Graduates of college, especially professional schools
such as engineering and business, are hired by large employers not as managers, but into
special positions just below management levels. Formerly called trainees, they now have
newer titles to satisfy the aspirations of new graduates for immediate job responsibility—
budget analyst, assistant store manager, or financial assistant. These newly-hired college
graduates, after a year or two of exposure to organizational routines, are usually promoted
promptly to management. Promotion from within therefore means the new manager was
promoted from a non-management job, even if he or she held the job for a very short time. In
terms of the total number of first- level managers. However, higher level managers are drawn
from the college graduates whose nearly entire career in the firm has been as a manager. This
two-track system for managers affects the former blue-collar worker and the college graduate
differently. The blue-collar worker is literally trapped in the middle between non-managers
and top managers. Sometime ago, I joined the long research tradition exploring the
psychological conflicts experienced by first-level supervisors as they sit on the boundary of
management. What never occurred to me then was the upward limit on their mobility. They
are probably not conflicted just because they are new managers; they are probably conflicted
because they know they can never become real managers. The personnel literature frequently
carries articles citing the difficulty in recruiting first-level supervisors from non-management
jobs. The solution to the personnel problem is not the training programs so frequently
advocated, but a structural change that would allow blue-collar workers to continue true
management careers. The promotion-from-within mythology simply encourages the former
blue-collar worker to see him/herself as better than other workers over whom he or she was
chosen, but, at the same time, to blame him or herself for not being chosen for higher
responsibility. Their attention is thus diverted from the structure which limits their
opportunity. Interestingly enough, at one time first-level supervisors formed, as consequence
of these working conditions, strong unions in the US. Especially in Ford Motor Company
(counterparts exist today in most industrialized nations). However, the Taft-Hartley
amendments in 1947 to the National Labour Relations Act exempted supervisors from
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protection against discrimination based on union activity. Today a first-level supervisor who
complained about the existing structure and gathered a group of his peers together to discuss
the problem could be fired as a union agitator and have no legal recourse, regardless of his
years of service. The college graduate is affected by the two-track structure in a complicated
way. Of course he or she believes that promotion above his or her peers at the first or second
level is based on personal merit, even though the odds dramatically favour their
advancement. Their competition, the former blue-collar worker who represent the large
majority of their peers is excluded from consideration. In addition, the college graduate
develops a false sense of identification with the workforce. In fact, he or she has never
experienced life as a true rank-and-file worker in the organization. Nevertheless, the brief
period of specialized non-management work combines with the myth of promotion from
within to convince top management that they truly understand the blue-collar workers. In
many cases, they find the blue-collar complaints groundless in terms of their own experience
on the college-graduate track. Of course, the only defence of this two-track system is that
college graduates, either because of their training or previous selection based on natural
ability, have the skills to be top managers. Unfortunately no empirical research supports the
superiority of college graduates as managers.
10. CAREER DEVELOPMENT LETS INDIVIDUALS PLAN THEIR
FUTURES IN ORGANIZATIONSCareer development means providing individual workers with information about their own
skills and interests (based on tests and counselling), knowledge about future job opportunities
in the organization, and the chance to influence their own assignment to jobs and training
programs. Again, a new army of consultants and popular authors are showing organizations
and workers how to implement a career-development program. The facts about career
development are clear from previous sections and will not be repeated here. In large
organizations, rigid structures determine who gets what jobs. These structures are rarely
explicitly written and reside as much in the shared assumptions and values of top managers,
shaped by their unusual personal experiences and progress through the organization. The
commitment of any employer to career development can be easily gauged. Worker influence
over job opportunities means open posting of job and training opportunities at all levels, open
bidding for all openings, and open feedback to applicants of the reason for selecting one
applicant over the other. I have reserved a special section for this human-resource system
only to highlight the psychological impact of this myth. Again the individual is portrayed as
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responsible for his or her organizational destiny. In the words which I have often used in
management training programs, "If it is to be, it is up to me". Such personal responsibility
discourages collective resistance to organization practices and to attempts to change them.
Failure is a personal problem. By contrast, holding top management prerogatives is a
personal accomplishment.
11. MANAGEMENT TRAINING AND DEVELOPMENT PREPARES
THE LEADERSHIP OF LARGE ORGANIZATIONSLarge employers invest substantial resources in the development of individual managers. The
tuition on the Sloan Fellows Program at MIT exceeds $10,000 for one year during which the
manager/student continues to receive full salary, living expenses, and support for education,
travel and other expenses (such as entertaining fellow students). During this year, the
managers learn about economics, psychology, mathematics, finance, labour relations,
marketing, and other disciplines presumably related to their jobs. Similarly, many less
expensive programs are offered by an increasing number of colleges; many companies and
government agencies are offering their own in-house programs for supervisors, managers and
executives. Although I may be accused of biting the hand that feeds me, there is no more
evidence that managers become more effective as the result of such training than there is for
any other training program. Indeed, there is a lingering suspicion on the part of many
instructors and participants that there is less tangible impact since the work that managers do
is very poorly understood. Management development is cited separately as a myth since it
directly contradicts the vast body of research accumulated over forty years in organizational
psychology on the nature of leadership. Originally, psychologists attempted to identify what
types of people made effective leaders. That effort failed since effective leaders come from
all backgrounds; educational training, ethnic groups, sexes, ages, and personality
characteristics. Next, researchers tried to discover what effective leaders did. Again, there
was no simple answer—some helped provide direction on a task, while others focused more
on the social needs of the groups. The current consensus among most industrial and
organizational psychologists is that effective leadership is a characteristic of a work group,
not of the individual manager. In effective groups, different members do what is required in a
given situation. Some will contribute information about the task? Others, or sometimes the
same people, will deal with social problems, like the need to relieve tension or provide
sympathy. It is therefore logically useless to take one member of the group away to improve
the leadership of the whole group or department or plant or company. He or she will come
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back to a larger unit whose capabilities have not changed and who will exert pressure on
managers to revert to customary ways of behaving. The rationale behind organization:
development of which more later is precisely on this point. It is necessary to develop the
leadership capabilities of social units for effectiveness. Despite this logical absurdity, legions
of psychologists who are taught to know better, continue to run leadership training courses
for individual managers. The question remains, what is the purpose of such training? Some
cynics have claimed they are vacations, time off for good behaviour. I offer a cynical, but
slightly different interpretation as follows. Management development as a movement
supports the dominant mythology in human-resource management. It encourages managers to
view the leadership of organizations as an individual effort rather than the collective
endeavour research has shown it to be. In addition, selection for a development program
signals to a manager that there is something about him or her in particular that stands apart
from the mass. Again, the top management of large organizations are persuaded that they
have earned the right to control other peoples' lives. In reality, as anyone remotely associated
with the administration of training courses knows only too well, selection of participants is
often haphazard and always political. Of course, given the political nature of assessing
managerial performance, how could it be otherwise?
12. ORGANIZATIONAL DEVELOPMENT APPLIES BEHAVIOURAL
SCIENCE TO IMPROVE THE FUNCTIONING OF THE ENTIRE
HUMAN ORGANIZATIONOrganizational development has been defined as a planned effort to improve the functioning
of an entire organization directed from the top of the organization. Usually O.D. involves a
third party from outside the target organization whether professor or private professional and
a range of techniques based on the behavioural sciences (interviewing, attitude surveys,
participant observation, organizational structure, etc. Most large organizations employ some
behavioural scientists on their staff to provide advice on either the practice or the techniques
of organizational development organizational diagnosis, team building, job redesign, etc. The
reality of organizational development is less benign. There is a strong anti-union thrust to
many organizational development efforts. M. Scott Myers and Charles Hughes are the
consultants most frequently associated with the use of organizational development to keep
unions out. But the problem is more widespread. Some of my best friends from graduate
school make or supplement their incomes by keeping unions out of entire companies or
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specific operations in largely unionized firms. Indeed, the AFL-CIO has begun to publish a
regular Report on Union-Busting _ consultants to warn their membership. The very first issue
of the report which I picked up listed the author of one of the best-known organizational texts
as an active union buster. I wrote him with the news, but so far he hasn't spoken to me about
it. This anti-union animus is probably more of a symptom than a cause. The more general
proposition is that O.D. supports not the entire organization, but top managements' goals,
definitions of problems, and range of acceptable actions. Some O.D. consultants claim the
organization is their client, but that usually boils down in operation to top management (or
the highest-ranking manager who will support the program). Therefore, O.D. is an intensely
conservative political force. Rarely is the question asked whether the top management client
should resign or whether the rank and file's desire for more pay is a valid organizational
intervention. Such changes are, as my O.D. friends tell me, "off limits". Recently O.D. has
entered into the quality-of-work-life area. This expands its product market by segmentation to
counter its anti-union image. Quality of work life consultants are O.D. experts who work for
a joint union –management committee to identify and resolve common problems confronting
workers and managers jointly. My personal experience colours my judgement on QWL
projects. I studied one intensively and it failed, (Driscoll, 1980). More importantly the QWL
consultants redefined their mission as O.D. (or, as a cynic might phrase it, took off their
sheep’s' clothing) and began working on a variety of management problems—team building
for the highest manager who supported the QWL project and management development with
one of her subordinates. The United Auto Workers report a much more positive experience
with QWL, at General Motors, but an objective assessment of that massive effort has yet to
be undertaken. O.D. in general has flourished to help managers and professionals work with
one another or to help managers work with non-managers in the absence of a union. Not
surprisingly it has been soundly criticized for its failure to address issues of power
distribution and inequality in organizations. Its focus is the organizational task/mission as
defined by managers. The recurrent struggles over the distribution of power and resources
that characterize all organizations in industrial societies have somehow escaped the attention
of these behavioural scientists. For example, I know of no O.D. consultant who has called for
a labour union or even outside arbitration as a means of dealing with individual complaints.
To a cynic, simply knowing that an O.D. consultants' pay check and future billings are
provided by managers is sufficient to predict the cosmetic reforms they are likely to
recommend. Thus while O.D. at least reflects the need to deal with human resources on an
organization-wide basis, politically it cannot deal with the major problems faced by workers.
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13. ORGANIZATIONAL PSYCHOLOGY DESCRIBES LIFE IN
ORGANIZATIONSBeginning in the late 1940's, a major focus for social scientists was life in the large work
organizations that emerged in manufacturing at the end of the 19th century and spread into
the government and service sectors as they matured in the 20th century. While there had
already been pioneering work by Roethlesberger and his colleagues at Harvard Business
School and by Kurt Lewin at MIT, major research programs blossomed at Michigan, Cornell,
Yale, Ohio State and elsewhere. Topics of investigation included leadership, motivation, job
satisfaction, absenteeism and job performance. Swarms of newly-minted PhD's carried out
the research at a geometrically-increasing number of institutions. However, as we reflect now
on these thirty years of research and ask ourselves what we know about life in organizations,
the answer is "Not much!" If an organizational psychologist claims to know how to increase
productivity or decrease absenteeism, he or she is viewed by colleagues as a huckster
exaggerating their capability. We can't select, much less train effective leaders; we can't
define productivity apart from a political context, much less increase it; and we can't
modernize American management, because we don't know what managers do (much less
what they should do in more productive and equitable work organizations). What is the
reason for this sad state of affairs? Two explanations cry out for mention: first, the trivial
subjects treated by organizational research and second, the superficial methods of
investigation. The most popular subjects of research on organizations continue to be job
satisfaction, leadership behaviour, motivation, commitment and loyalty. What these subjects
have in common is their interest to managers in their political role as holders and maintainers
of power in current organizational structure; rarely do we find subjects of pressing societal
concern such as productivity, industrial Health, causes of unemployment or inflation. Second,
the method most commonly applied to organizations is a questionnaire survey of workers in
a, single operation. Rarely do we find studies with a long term perspective, focused on
observable behaviours of workers, or examining their detailed beliefs, or aggregating the
impact of simultaneous changes in many organizations.
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CRITICISMS
1. NEED TO STEP UP, ADD MEASURABLE VALUE, AND BE
MORE ‘STRATEGIC’Many HR people invest more in activities than outcomes. A high quality senior HR
person is as critical as the CFO but HR need to get out of the picnic and insurance
forms business. Sometimes HR brings a problem without bringing an answer to how
we should handle it, or some options on different approaches. HR needs to be more
proactive, not just reactive.
2. LACKING FINANCIAL/BUSINESS ACUMENHR will not add enough value if they have not experienced the real world. That’s a
criticism of the role – HR doesn’t understand the business and they don’t have that
commercial nous, which in many cases is probably true.
3. THE PAPERWORK & POLICY POLICENo consideration is done supporting a termination unless there have been 3 verbal
warnings, 4 written memos and a suspension on file regardless of the individual
situation. — HR Manager Design and enforce too many rules.
4. MINDLESS HIT-MEN HR is unpopular, but one reason they are the unpopular is that HR is the pet. It isn't
just that HR does the bidding, but HR does it as if they are robots. They are like hit-
men — they do as they are told without thinking much.
5. LACKING PR/COMMUNICATION/INFLUENCING SKILLS63.5% of HR respondents believe that employees in the business do not understand or
are unsure about what the human resources department does or what it should be
doing. Of non-HR respondents to the survey, which number stands at 80.4%" —
AHRI, HR pulse Research Report 2007. HR needs to be better at selling itself,
communicating what it does, and influencing others in the organisation.
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6. LACKING RECRUITMENT EXPERTISE
In one worst case scenario, the HR staff hired a single mum, placed her in the city
office, and never told her that she would be expected to travel about 25% or more of
her time. This was a disaster for a single mother with no support structure in a new
city. Many HR people don't have proper recruitment training on how to create a job
description, write advertisements, source candidates, or conduct interviews. HR is
often judging employees on jobs they have no actual experience in.
7. LACKING LEGAL EXPERTISEMany current HR teams seem to be less knowledgeable about workplace law than in
the past. This Court unfortunately sees too many instances similar to the matters in
this case that are inappropriately and incompetently approached by persons who
parade under the banner of Human Resources specialists.
8. LACKING PERFORMANCE MANAGEMENT EXPERTISEThe annual review needs to be killed and really think about how to give people
timely, appropriate, relevant feedback that’s not coming from a HR-driven process,
but from a business-driven process. Often the process is managed by lower-level HR
administrators without a complete understanding of performance and productivity.
9. HR JARGONHR is full of bloody jargon. "If you are unfamiliar with HR’s well-earned reputation
for the overuse of creative language and jargon, a simple Google search can quickly
reveal that those outside the profession often refer to it as “HR gobbledygook,” and
“HR speak.” "- Dr. John Sullivan. Examples: Downsizing, Rightsizing, Redundancy,
Retrenchment, Outsourcing, Remuneration, Executive Search, Competency
Framework, Employee Value Proposition, Intellectual Capital, Performance
Appraisal, Key Performance Indicators, Human Capital Management, Employee
Engagement, Change Management, Strategic HRM, Training Needs Analysis, Talent
Pipeline, Alignment, Centralisation, Value-Add, Leverage, Paradigm.
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GLIMPSEWe are going to explain through various case studies that HRM is not a Myth.
Following company’s case studies are discussed as under:
1. Honda and Maruti – Conflict and Resolution.
2. IKEA- Unique HR policies.
3. Philips- Reconstructing Policies
4. Google and Wal-Mart- Flipside
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CASE STUDIES
1. CONFLICT AND RESOLUTION IN HONDA CASE
COMPANY PROFILE:
Company: Honda
Headquarters: Minato, Tokyo, Tokyo, Japan
CEO: Takanobu Ito
Founded: September 24, 1948, Hamamatsu, Shizuoka Prefecture, Japan
Founders: Takeo Fujisawa, Soichiro Honda
INTRODUCTION:
The case discusses the various reasons which led to the dispute between the management and
employees of Honda Motor Cycle India (HMSI). It elaborates the incidents, which led to the
strike at the company that resulted in HMSI workers being severely beaten up by the police.
Labour strife and the management's inability to deal with it effectively had resulted in huge
losses for the company due to the fall in the production level at the plant. The case highlights
the growing number of instances of clashes between the employees and the management of
companies in India, which is often guided by external parties such as trade unions and
political parties.
ISSUES CONSIDERED:
Understand the factors that lead to labour unrest at a factory and the impact of such
incidents on the employees and the company.
Study HR policies adopted by organizations to prevent labour unrest at the workplace.
Examine top management's role in maintaining a peaceful working environment.
Analyze the role of external parties such as trade unions; political parties etc., in
disturbing the working environment in a company.
On July 25, 2005, the management of the Honda Motorcycle & Scooter India Limited, a
wholly-owned subsidiary of Honda Motor Company Limited, encountered violent protests
from workers that disrupted production at their plant in Gurgaon.
The protest followed six months of simmering labour unrest at the HMSI factory in which the
workers also resorted to job slowdown since December 2004 when the workers' demand for
an increase in wages was rejected by the HMSI management. With their demands being
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rejected by the management, the workers tried to form a trade union and this resulted in a
confrontation with the management. Fifty workers of the production team were suspended
and four others dismissed in May 2005.
On July 25, 2005, the workers of the plant were demanding reinstatement of the suspended
employees when some workers allegedly attacked policemen on the plant premises. This led
to police intervention and a violent tussle ensued between the police and the workers in
which workers protesting peacefully were also beaten up. The police were reported to have
overreacted and it was alleged that they had been overzealous in protecting the interests of
the HMSI management, even without any direct request from the company's management.
For companies, the incident brought to the fore the need to maintain sound industrial relations
to ensure productive and profitable operations.
THE BLAME GAME:
The management and the workers traded allegations and counter allegations on what the root
cause of the dispute was. They blamed each other for the situation that ultimately took an
ugly turn on July 25, 2005. The management held the workers responsible for indiscipline
and for slowing down production, while the workers insisted that there had been no
indiscipline on their part and that the management was bringing up this issue only to prevent
the formation of a trade union at HMSI.
There is lot to be rethought about the working style of the Honda Management, the Gurgaon
Government & Police.
HERO HONDA MANAGEMENT:
Some of the issues the Hero Honda management didn't take into consideration before the
Lock-out.
Didn't adhere to the Labour Laws: As per Indian labour laws, the lock-out is not
allowed until cleared by the government. This was an illegal lockout. The
management should always adhere to the law of the land, which somehow, Honda
management failed to do.
Weren’t diplomatic enough: The main issue revolved around the suspension /
dismissal of some mischievous employees. Before dismissal, the management should
have done the analysis of the possible outcomes and should have dealt with it in more
diplomatic way. Maybe a counselling session, transfer, VRS or some other action
would have been a better solution, as these were labour union leaders.
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Failure of Public Relations Department: The Hero Honda Management has not
handled the PR well. Almost all the press and televisions were projecting the Honda
Management as culprit. With the Budget, Hero Honda has for PR, they should have
clarified their stand in front of all the national televisions and Newspapers before the
actual dismissal of the first 8 employees took place. It has been Failure of PR
department of Hero Honda as well. This are some of the points, which if taken into
consideration before the dismissal of the said 8 employees, the event would not have
taken place in first place.
THE GOVERNMENT AND POLICE FAILED ON FOLLOWING FRONTS:
Failed to administer the Law: The Hero Honda company didn't adhere to the Labour
laws and had illegal lock-out. The Chief Minister / Industry Minister / Labour
Minister should have immediately intervened and should have resolved the matter as
it is one of the biggest firms of the state and the country. Further as this lock-out being
illegal, the management should have been dragged to the court by the government,
even before the employees took to the street.
Failure to Handle the Employees Agitation: The violence which erupted during the
agitation can be attributed to the failure of the government / police to handle the rally
situation. They were quite aware of the dimensions the rally could take, still instead of
water guns and tear gas to disperse the crowd, they used lathis. The major problem
with lathis is that, it may and did actually injure people. The purpose was to disperse
the crowd and not cause injury to them.
No Proper training to the Police Force: Only the IPS officers get proper training to
handle difficult situations and are trained to understand the psychology of crowd. But
it is the ground units which actually require it. The police constables should have
understood that the agitating employees are agitating against their employers and are
as much a citizen as anybody else in India. They are not terrorist or criminals. If the
ground police personnel would have understood this and would have taken this into
consideration while dispersing the crowd, lot of unnecessary injury to the Hero Honda
Employees could have been avoided.
COULD THIS UGLY SITUATION HAVE BEEN AVERTED?
Several factors can lead to a conflict between the workers and the management of any
company, and as such, companies should be prepared to trace the root cause of the problem
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and solve it. Industry experts opined that with proper understanding of the industrial laws and
causes of disputes, the management and the workers of any company could avoid incidents
such as the one at HMSI.
2. CONFLICT AND RESOLUTION IN MARUTI CASE
COMPANY PROFILE:
Company: Maruti
Headquarter: New Delhi, India
CEO: Kenichi Ayukawa
Founded: 1981
Founder: Sanjay Gandhi
INTRODUCTION:
On 18th July, auto factory workers in Maruti’s Manesar plant attacked supervisors and started
a fire that killed a company official and injured 100 managers, including two Japanese
expatriates.
The attack was allegedly influenced by:
A caste slur by a supervisor against a worker.
Failed negotiations about employee regularization.
The company has faced several incidents of employee protest, but never of such scale and
violence. The incident is the worst ever for Suzuki since the company began operations in
India in 1983.
THE REAL ISSUE:
Independent union for Manesar.
Suspended colleagues are taken back.
Sign and accept good conduct bond.
Both sides refuse to budge- Who will blink first?
WORKERS DEMANDS:
A five-fold increase in basic salary.
A monthly conveyance allowance of 10,000.
A laundry allowance of 3000.
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A gift with every new car launch, and a house for every worker who wants one or
cheaper home loans for those who want to build their own houses.
In addition to this compensation and normal weekend/holidays, the union demanded
the current four paid weeks of vacation be increased to 7 weeks.
REASONS FOR UNREST:
The plant workers wanted to register a new union- The Maruti Suzuki Employees
Union (MSEU) – and had already applied for registration, something the management
was opposed to.
More than 90 percent of these are contract workers who work for 10-12 hours for
4000-5000 per month. The workload and speed is extremely high and they have to
face verbal abuse and even beating by the supervisors and security guards.
Although the strike at Maruti has been called off and the matter resolved for the time being,
there are hushed discussions across companies on the way managements handle workers and
trade union issues. BMS spokesperson Amar Nath Dogra said, “A strike is not the first but
the last option for workers. If it happened, it was because there were issues with the way the
management dealt with workers’ demands. There is a mechanism where workers and
management recognise unions and decisions are taken with mutual discussion. We are
concerned about the way the company handled the situation.”
Experts stress that the trend of hiring workers on contract rather than taking them in as
permanent employees gives company managements the right to hire and fire on issues of
performance or in times of recession, something not easy in case of permanent employees
under Indian laws.
The demand for a new union at Maruti’s Manesar unit may be a signal of discontent amongst
workers regarding management practices and their own rights and the lack of a redressal
mechanism. A new era in the trade union movement will happen only if unions can operate in
full freedom.”
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New union will bring a third party-Political party
No clear demand
Lack of descipline
Accept and sign the "Good Conduct bond"
LABOUR’S SIDE:
THEORIES CONNECTED TO THE ISSUES:
AREAS SPECIFIC TOPICSLabour Laws Industrial Disputes Act (strikes, lock-outs,
conciliation etc.)Trade union actFactories act (working conditions)
Managing Employee Relations Principles of natural justiceGlobalisation and industrial relations
Human Resource Management Collective bargaining and grievance management.
Human Resource Planning Employment decision like hiring etc.
MANAGEMENT SIDE:
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Rs 1500 is deducted for every day on casual leave
long working hours
What part did we get of the profit that company earned by exceeding the targets?
Contract labourers-less pay (no speacial benefits) and permanent labourers-high pay (with special benefits)
A separate union for Manesar
WHAT WENT WRONG?
MARUTI’S SOLUTION:
HR PROBLEMS:
Human Resource Managers claim themselves to be professionals and they have professional
associations like National HRD Network to promote professionalism among them. The work
at the Manesar factory of Maruti Suzuki Limited was stopped from 18th July 2012 to 21st
August 2012 due to the failure of human resource management function, which has resulted
in the death of a general manager and injuries to around eighty managers by the vengeance of
frustrated workers. While everyone has condemned the attack and expressed condolences to
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Workers are not commodities
Trust and confidence between the 'white and blue
collars'
Strikes is ethical whereas deliberately
creating faults in products is not.
Politics has no place in unions
No unnecessary comments in the
mediaLure of contract
labour
Maruti showed insouciance towards workers
The stir ended after over 1000 protesting workers agreed to sign the 'good conduct bond'
Company agreed to take back 44 regular employees after they serve a suspension period.
Within a week he company started recruiting temporary manpower from ITIs
The company said that the workers would not be paid for last 30days
the demised manager’s family, no one from the HR profession has tried to find out whether
and if at all there was anything wrong with the HR department of MSL.
The Maruti Suzuki Workers’ Union leaders have peacefully negotiated throughout the day for
the revocation of suspension but management has taken a rigid stand not to negotiate in the
matter. When the situation was going out of control the management has orally informed the
union leaders that suspension order will be kept in abeyance. Workers wanted this oral
information in writing and management refused to give it in writing which has finally led to
the violence. If management was sincere in its words, it was prudent to give it in writing to
avoid the violence.
3. UNIQUE HR POLICIES FOLLOWED BY IKEA
COMPANY PROFILE:
Company: IKEA
Headquarters: Delft, Netherlands
Founder: Ingvar Kamprad
Founded: 1943, Älmhult Municipality, Sweden
CEO: Peter Agnefjäll
INTRODUCTION:
IKEA is a Sweden based retail chain which deals in furniture and house decor items. It has
been ranked 20th in 'The World’s Most Attractive Employers 2011' in the Universum
Awards, an employer branding event. It also got mentioned in Training magazine’s annual
“Top 100” ranking of companies that excel at human capital development (four consecutive
years) and in FORTUNE’s “100 Best Companies to Work For” list (three consecutive years).
IKEA has branches in around 41 countries.
FEW IMPORTANT INSIGHTS THAT CAN BE DRAWN FROM THE JOB
DESCRIPTION PATTERNS FOLLOWED AT IKEA ARE:
By emphasizing co-worker, it is emphasizing equality in terms of how one should
treat fellow employees.
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About the job, “at the lowest cost” emphasizes the core DNA of the organization i.e.
creating value by incrementally reducing cost points.
“Quick decision making” and “Solving problem while on the go” creates a vivid
picture of dynamic work environment at IKEA.
By highlighting “improving the productivity”, Task portion reemphasizes that cost-
consciousness is highly valued at IKEA.
POLICIES FOLLOWED BY IKEA FOR INCREASING EMPLOYEE’S
DEVELOPMENT:
Training:
- Co-workers who have mastered their current job are encouraged to seek new
challenges.
- Job enlargement/enrichment, changing the Job scope/location.
- Annual development talks to discuss and outline career paths.
- On-the-job training complemented by traditional classroom courses.
- A wide range of web-based training activities for all aspects of IKEA operations.
Selection:
- Emphasis on value-fit as its selection criteria.
- IKEA provides a co-worker as a mentor for new co-worker for some time.
Compensation:
- IKEA has developed global, mandatory guidelines for compensation and benefits.
- Each country must offer the same benefit structure for all co-workers in the country.
- Benefits are to be based on core IKEA values as well as local laws and market
conditions.
HRM POLICIES ENHANCING MOTIVATION:
Internal Promotion:
- One year development adventure programme that any co-worker with potential can
apply for in the beginning of their career.
- The participants travel to two different countries for six months each to work in
different fields to what they are used to.
- These Co-workers are absorbed to take leadership responsibility, forming the pool of
highly skilled IKEA managers of the future.
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Incentive System:
- Line management takes a direct role in the design and determination of reward policy
in IKEA.
- Emphasis on designing reward systems that best fits the local context.
Encouraging Diversity in the workplace:
- About 40% of the Co-Workers are women with a great mix of nationalities.
- IKEA’s purchasing and retail operations in 41 different countries are led by country
managers of 14 different nationalities.
EMPOWERMENT ENHANCING HRM PRACTICES:
Grievance Procedure:
- “VOICE”- IKEA uses a company-wide survey called “VOICE” to monitor how co-
workers view various aspects of their employment at IKEA.
- The “IKEA leadership Index” quantifies how co-workers view their managers.
Flexi Time:
- One of the best work practices espoused at IKEA is flexible timing as per co-workers
need.
Keeping Co-workers Informed:
- IKEA Intranet is complemented by a variety of different channels such as regular
meetings, easily accessible notice boards, newsletters and closed-circuit radio.
- The global co-worker Magazine Readme which is distributed to all co-workers is
translated into 19 languages.
- IKEA has web-enabled services on the Internet to better reach co-workers with
limited computer access at work and better access outside work.
Supporting Work-Life Balance:
- Co-workers of different ages are at different stages of their lives and are delegated
different activities as per their convenience.
IWAY STANDARD:
It is a code of conduct that defines the guiding principles that governs the organisation.
- Prevention of corruption: Company has established the IKEA Corruption
Prevention Policy and The IKEA Rules on Prevention of Corruption for its co-
workers and external business partners.
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- Dialogue with Unions: IKEA supports each co-worker’s right to freedom of
association and does not express any preference within the institutional and
recognized co-worker associations. IKEA respect the rights of its co-workers to join,
form or not to join a co-worker association.
- Workers’ accident insurances: An accident insurance covering medical treatment
for work related accidents is available to all workers.
- Safe and Healthy Work Environment: All co-workers within retail and distribution
undergo safety training before starting to work at IKEA.
CONCLUSION:
IKEA’s innovative human resource management practices have helped build a strong and
nurturing culture that promotes diversity and creativity. In an industry characterized by high
turnover, their employee friendly policy has made IKEA a preferred employer in the retail
sector. Working in line with strategy, its HRM practices has helped in sustaining IKEA’s
growth. In many countries, IKEA is the “Employer of Choice” and globally IKEA is listed as
one of the top 50 most attractive employers in 2010.
4. RECONTRUCTING POLICY OF PHILIPS
COMPANY PROFILE:
Company: Philips
Headquarter: Eindhoven, Netherlands
CEO: Frans van Houten
Founded: May 15, 1891,
Founders: Anton Philips, Gerard Philips, Frits Philips
INTRODUCTION:
Philips was founded in 1891 by Gerard Philips (Gerard) who established a facility at
Eindhoven, Netherlands, to produce incandescent electric lamps.
Gerard's younger brother, Anton, joined the business in 1895 as a salesperson and helped
Gerard's company to become one of the largest producers and marketers of carbon-filament
lamps by the early 1900s. Philips laid a strong emphasis on research right from the start.
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ISSUES FACED:
Strategy setting and decision making in globalized firms.
Unsuccessful in translating its technological prowess into marketing success.
Netherlands-based Royal Philips Electronics (Philips) was on the verge of bankruptcy in May
1990 when the company posted losses of $2.6 billion. At this point, the top management of
the company launched a set of initiatives aimed at turning the company around. One of the
measures initiated was 'Operation Centurion' which aimed to bring about drastic changes in
the work culture of the company and reduce costs.
The restructuring efforts continued throughout the 1990s when Philips initiated job cuts, sold
unprofitable businesses and closed down many manufacturing facilities worldwide
These efforts helped in improving the financial health of the company but were not able to
address concerns like the bureaucratic work culture and the company's poor marketing of its
products.
Philips had a history of breakthrough inventions but the company failed to market them
effectively. In late 1999, Philips embarked on a worldwide marketing campaign for the first
time in its history. Thus, the company made a clean break from its past image as a
technology-oriented company to one that was market-oriented.
Gerry Kaufhold, senior analyst at In-Stat, a technology research firm based in Massachusetts,
US, commented, "Historically, they've been a great engineering company with less than
fantastic marketing, so this signals sort of an awakening by Philips."
In 2001, Philips launched a company-wide restructuring program called 'Towards One
Philips'. The program attempted to foster greater cooperation among its various divisions and
to make Philips a unified company. The aim of the program was to get rid of the bureaucratic
work culture prevailing in the company and promote teamwork. The initiative also aimed to
cut costs, develop innovative products and technologies and improve relationship with
customers.
Initiated by Gerard Kleisterlee, the President and CEO of Philips, the TOP program aimed to
provide long-term solutions to the company's problems The program helped not only in
lowering costs but also promoted a spirit of collaboration.
'Strategic Conversations,' a key part of the TOP initiative, promoted cooperation in setting
company strategies across product groups.
Commenting on the importance of strategic conversations, Ian Wylie in an article wrote,
"What is at the heart of Kleisterlee's plan to create 'One Philips' isn't technology or tactics: its
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talk. In order to build internal confidence, stimulate cross-boundary cooperation and spark
new-product speed to market, Kleisterlee is sponsoring what he calls 'strategic conversations':
dialogues that centre around a focused set of themes that Kleisterlee believes will define
Philips' future."
THE OPERATION CENTURION PROGRAM:
Timmer realized that Philips' poor performance could not be blamed on weak markets alone.
Competition from aggressive Asian companies like Sony was intensifying especially in
Europe. Philips was finding it hard to get its innovations converted into saleable products
quickly. The company's manufacturing costs were high, and this put a lot of pressure on its
profit margins. The biggest problem was a highly bureaucratic corporate culture that was very
resistant to change. Facing the tough challenge to change the company's culture, Timmer
remarked, "You just can't change a deep-rooted corporate culture in one or two years. It takes
at least five years or long.
RESTRUCTURING UNDER BOONSTRA:
One of Boonstra's first moves was to get rid of businesses that were making significant
losses. Philips' 32% equity stake in Grundig was brought down to 5%. Boonstra also sold off
Philips' cable operations, car navigation systems, and the Super Club video-rental chain.
Another problem Boonstra faced was excessive vertical integration in the company.
TOWARDS ONE PHILIPS:
By 2001, more than a decade had passed since Philips began restructuring. Timmer's
Operation Centurion did not succeed in changing the company's bureaucratic culture.
Boonstra's efforts too could not achieve a culture change. Now it was Kleisterlee's turn to
fight bureaucracy in the company and bring in a culture that promoted teamwork. Kliesterlee
called his initiative 'Towards One Philips' (TOP), and through it, he aimed to make Philips
work as a single, unified company. Apart from bringing in a cultural change, the initiative
also aimed to cut costs, develop a range of new technologies and products, and improve
relationship with customers.
PROMOTING COLLABORATION:
The TOP program also called for extensive collaboration among product divisions - a big
change from the past when Philips was run as a set of disparate companies that acted
independently (See Exhibit V for corporate structure of Philips in 2004).
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FOCUS ON CUSTOMERS:
As part of its TOP initiative, Philips also began developing a range of new technologies using
its traditional strength in technology research. One such technology was known as 'Connected
Home. 'This technology depended heavily upon Philips' leadership position in the fields of
display, storage and connectivity technologies. The concept made use of wireless
technologies to connect and seamlessly communicate with various household devices.
Gottfried Dutine, the CEO of Philips' Consumer Electronics division explained, "If you're
watching a film in the living room and you want to move to the kitchen to wash the dishes,
the content will follow along with you uninterrupted. This will happen through an integrated
network of home displays, content storage and connectivity devices - what we call the
“Connected Home”.
THE BENEFITS:
The TOP program yielded encouraging results by bringing about a clear cultural change in
Philips.
The increased collaboration between product divisions helped in knowledge sharing. An
example of this collaboration was the 'Ambient Experience’ project that created a
personalized healthcare environment aimed at individual patient comfort and increasing the
overall efficiency of a hospital's radiology department.
The project was a combined effort of Philips' Medical, Lighting, Consumer Electronics and
Design divisions.
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FLIPSIDE OF GOOGLE AND WALLMART
1. COMPANY PROFILECompany: Google
Headquarters: Mountain View, CA, United States of America
CEO: Larry Page
Founded: September 4, 1998
Founders: Larry Page, Sergey Brin
2. GOOGLE’S ORGANIZATIONAL CULTURES
They are not only one of the fastest and most useful web search engines around; they are also
one of the top 100 companies to work for according to Fortune (2007).
Google strives to have the fastest, most reliable search engine on the web and in order to
accomplish this Google has to hire employees that are the best in their technological field.
Google rewards their employee's hard work with an extremely relaxed workplace that
encourages creativity through fun activities such as roller hockey and through a casual dress
code. Google also encourages their employees to take care of their minds and their bodies by
offering them the ability to work out in the gym and get a massage inside the company
building. "There is an emphasis on team achievements and pride in individual
accomplishments that contribute to the company's overall success". Google understands that
their employees have active lives outside of the workplace and they encourage their
employees to bring those parts of their lives into the Google employee community. One good
part is the fact that they build such loyalty from their employees that many of the employees
see each other and the Google management as a family.
Google values a commitment to their users in that they strive to give a higher level of service.
It does not matter where you work, if you are dealing with people, you should give them the
best experience possible. Even though Google works with their users virtually, they still
value the customer relationship.
Google embodies the team orientation primary characteristic of organizational culture. As
stated earlier, Google encourages its employees to work and play together so that a family
bond is formed. According to Google (2007), "Meetings that would take hours elsewhere are
frequently little more than a conversation in line for lunch and few walls separate those who
write code from those who write checks." This really does reinforce a team environment.
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Everyone is pretty much on the same level and everyone works together. The limited walls in
the building help the employees to feel like a group rather than an outsider in another
department.
Google's organizational culture is very strong. Google hires people that embody their
company's values and feel the same intense desire for unlimited amounts of information. This
desire allows the company's employees to work towards the same goals and intensifies the
bond that they share. Google tends to have a low turnover rate and receives over 1,300
applications a day (Fortune, 2007).
Google's culture is a combination of things. It is ethical, customer-responsive, and spiritual.
Google encourages its employees to be creative in problem solving which sometimes calls for
risk taking. These employees are allowed just enough freedom in their jobs that they do not
take it for granted and this keeps them on ethical ground. The Google employees also have a
sense of team instead of self so this encourages them to work together to achieve goals rather
than compete against one another. This also prevents unethical behaviour.
Google's low formalization and service-oriented employees work to be customer-responsive.
They are allowed the freedom to make decisions that benefit Google users. The employees
strive to provide the best service available and to do this they must be able to relate to their
users. They understand that "thinking outside of the box" is what they are known for so they
go above and beyond what others would do to satisfy a customer need while maintaining
company values.
This "outside of the box" type of business also puts the company into a spiritual type of
organization. Employees are rewarded for individual successes and for team
accomplishments. They are also encouraged to have fun with their job. Google's ability to
allow their employees to have fun while at work is motivating in itself. This motivation
shows itself in the work as well. It is a give and take relationship both sides get something out
of it. Google has a unique way of conducting business that appeals too many. It is this sort of
culture that creates individuals that have the desire and the motivation to stay with a
company.
3. A CRITIQUE OF GOOGLE'S CULTURE
Many analysts feel that Google's zero per cent employee turnover rate during the dotcom
boom, was a testament to its salubrious organizational culture. But not everyone was
convinced that Google had got it right in terms of its work culture. They felt that company's
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culture was not set to manage its growth. A 12-hour working day had become norm at the
company. Google's recruitment process was also criticized by analysts.
It was pointed out that Google had become too narrow in its recruitment by focusing only on
the academic records and graduate ranks of the applicants rather than on experience.
Commenting on the recruitment process, one Googler said, "If you've been at Cisco for
20years, they don't want you." But the management defended the recruitment process saying
that they valued intelligence and brainpower more than experience.
4. SOME OF THE NEGATIVE ASPECTS OF GOOGLE’S
CULTURE
Amidst the successful reputation of Google in the Internet industry, there are few criticisms
in the organisational culture of the Company. The following negative features: absence of
clear management structure, poor employee relations and work ethics, and its informal work
culture.
An organisation must have a core management structure. Although Google has plus as key
figures, the rest of the staff are not strictly structured. Organisational management structure is
a basic element in planning and decision-making. On the case of project engineers and even
the rest of the workforce, the unclear definition of management structure can lead to
organisational conflict. Recognising the diversity of skills and Googlers, conflict is a risk
because employees have differing values and experience differing situations. The lack of
hierarchy resulted to confusion about control and decision making power and practically
affects overall working conditions. To address such, management theories serve as
established body of knowledge that will guide the engineers and project managers in making
excellent decisions for the benefit of the whole organisation. Similarly, the understanding of
management structure is directly linked to enhanced organisational performance requiring
Google’s management to review its organisational composition, job positions, and area of
control.
On its HRM functions, Google is acknowledged with a unique recruitment process yet some
aspects of the process are criticised. Some critics describes Google’s recruitment process is
narrow. Companies worldwide undergo changes and utilise various job selection and
recruitment methodologies due to some affecting factors i.e. globalisation and technology
innovations. For Google, there is a need to re-evaluate and study the HRM functions and
policies particularly its recruitment process to meet the demands of the target market. A lot of
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organizations began to significantly switch their people-managing policies and systematise
them in new directions (2001). It is acknowledge that selection and recruitment of potential
employees, like on the case of Googlers, is directed to the attainment and accomplishment of
companies’ goals in the global scene. Knowledge, skills, and abilities that include job-related
information and the necessary human abilities to perform certain job activities should be
considered by Google HR team rather than academic proficiency alone. The importance of
valid KSAs cannot be overstated, as the relationship between them and individual
performance in the organisation is well-established. Most KSAs are gained through
experience yet Google oversee this point. It is accepted that quality, competence and
flexibility among the employees had efficiently replaced quantity of task accomplished and
imperceptive obedience gained through extensive experience. Thus, Goggle should
reconsider its recruitment and selection policies and practices.
Further, Google is also called upon its problematic employee relations and work ethics as
seen on the unjust treatment of contractual employees and inefficient organisational
behaviour. Around 30 percent of Google’s total employees are contractual, not given any
employee benefits, and treated unfairly. To solve such problems, hiring, training, and
providing pay and benefits to employees are essential tasks that must be accomplished by the
organisation. For example, the 12-hour working day is arguably stressful especially when
expectations are needed to be exceeded i.e. the workloads and task requirements among
employers and employees themselves. Stress lowers the efficiency of the employees to
perform their tasks. According to and in order to help organisations alleviate stress within
them, they must consider the forms of stress management. The major stressors in the
workplace must be properly identified and assessed, and the concerned personnel must help
their employees identify their major personal sources of stress. Furthermore, the employees
must be assisted in identifying their own stressors and stress tolerance levels. Before learning
how to deal with stress, employees first have to identify those stressors which they react to
because not everyone responds the same way to the same stressors. To aid this process,
organisations might provide health risk appraisals which test for their employees' levels of
stress. In general, it is suggested that organisation’s HR policies are responsive to the needs
and welfare of the whole workforce. The HRM role must be proactive rather than reactive,
that is, serving the employers and employees needs and welfare as directed to the
achievement of competitive advantage. It should not only on the basis of attracting the best
employees but taking care, developing and grooming them as organisation’s indispensable
assets. As according to and, the organisation’s HR personnel must understand its workforce
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and create organisational systems that will result to the development of human labour that
works for the valuation of a larger organisational unit.
On the issue of work ethics, Googlers are branded to be arrogant at times and never kept their
appointments and always turned up late for clients’ presentation. According to ethics is a
moving target. Social values change over time as influenced by a composite web of factors.
To solve this, the HR leader/manager is the key person that upholds the welfare, matters of
concerns, as well as conditions of the entire workforce. With this given intricate set of tasks,
the need to identify its overall role is imperative as it determines the scope of its managerial
functions and power. The presence of strategic planning in management minimises the
potential pitfalls of the said process such as uncertainty. Managing workplace diversity is also
a potent solution. Diversity is one of the most effective strategies that manage individuals
with different characteristics who eventually create the team. It seeks to address issues related
to human resources, internal communications, interpersonal relationships, conflict resolution,
quality, productivity, and efficiency. To solve work problems within Google working
environment, the recognition of its strengths as well as it weaknesses in all areas of
production is basic so as to be used as the form of practical guide for reinforcing its strengths
and similarly creating potent solutions to its weaknesses.
All in all, the negative issues of Google are not yet reflected to its current organisational
performance. However, it is forecasted that such negative issues are threats to its success. Its
organisational culture is claimed not to be set to manage its growth. With these given
negative aspects of Google, they surely have their own organisational plans and initiatives of
addressing such difficulties.
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5. COMPANY PROFILE
Company: Walmart
Headquarters: Bentonville, AR, United States of America
CEO: C. Douglas Mcmillon
Founded: 1962, Rogers, Arkansas, United States
Founder: Sam Walton
6. CRITICISMS OF WALMART
WALMART AND WAGESWith regards to wages you don’t get rich working at Walmart. A typical Walmart worker,
they report the average wage is between $10 and $11 an hour. Wages are one of the issues
that arise in walmart. A team of HR studied the issue arising and came communicated to the
employees that they will be given incentives on quarterly basis as per the achievement of
targets and performance of the employee. The incentives were given once in 6months but
now it is said to be done quarterly.
Walmart does have a large number of its employees that own common stock in the company,
which makes it somewhat different than some of the others. And there seems to be some high
level of loyalty to the company, on average, even though, obviously, there are some
exceptions.
WALMART AND HEALTH BENEFITSHealth benefits got a lot of the attacks from the labour unions and it is the unions that are
leading this attack on Walmart.
Health benefits in the industry tend to be relatively low in retail trade. Never higher than 50
percent, never lower than 40 percent of the workers, receive health insurance through
Walmart. That’s not a typical of that industry.
HR made sure that they inculcate a scheme under which the company provides health
benefits on partly basis i.e. a part of insurance instalment was given by company and rest was
done by the employee himself.
WALMART AND LOCAL BUSINESSESWalmart faced a big criticism that it is one of the reasons of shutting down of the local
business players. In here HR made sure to inform the media and the customers that it is not
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the reason for the same, but it is the new technology, comfort, variety and structure that is
attracting the people to buy the walmart products.
WALMART AND THE ENVIRONMENT
One of the arguments is, it brings congestion to communities it builds unsightly stores. HR
informed the world that usually Walmart goes into some pretty grubby areas of town, where
the stores that are already there are not architectural wonder. And one person’s eyesore may
be another person’s Taj Mahal.
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CONCLUSION
So to conclude we would like to say that from the above mention case studies on various
issues we would like to conclude that HRM is not a Myth. HR played an important role in
handling and resolving issues that occurred in the company like Maruti and Honda even when
situation seemed to be out of control. Same goes for IKEA that HRM played a major role in
proper working of the organisation and solving the problem timely. Following are some of
the few more observations to conclude the topic.
1. HRM helps management in the preparation adoption and continuing evolution of personnel
programmes and policies.
2. It supplies skilled workers through scientific selection process.
3. It ensures maximum benefit out of the expenditure on training and development and
appreciates the human assets.
4. It prepares workers according to the changing needs of industry and environment.
5. It motivates workers and upgrades them so as to enable them to accomplish the
organisation goals.
6. Through innovation and experimentation in the fields of personnel, it helps in reducing
casts and helps in increasing productivity.
7. It contributes a lot in restoring the industrial harmony and healthy employer-employee
relations.
8. It establishes mechanism for the administration of personnel services that are delegated to
the personnel department.
Thus, the role of human resource management is very important in an organisation and it
should not be undermined especially in large scale enterprises. It is the key to the whole
organisation and related to all other activities of the management i.e., marketing, production,
finance etc.
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REFERENCES
http://voices.yahoo.com/the-organizational-culture-exists-within-google-1657615.html?cat=3
http://www.icmrindia.org/casestudies/catalogue/Human%20Resource%20and%20Organization
%20Behavior/Google%20Organizational%20Culture-Human%20Resource%20Management%20Case
%20Studies.htm
http://www.independent.org/events/transcript.asp?id=125
http://www.workplacefairness.org/reports/good-bad-wal-mart/wal-mart.php
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