Human resource management business system

INTRODUCTION

HRM is a business system to process and control people in firms to achieve the goals of the firm. Human resource management is the main key factor for the success of the organisation. This provides the organisation to sustain a competitive advantage in a fierce global competition. The organisation should adapt its structure to the environment in which it exists to achieve a competitive edge. The organisation should also adapt its management process for well growth of the company. Here the HRM systems play the key role for the management process.

HRM OF JAPANESE FIRMS BETWEEN 1960 TO 1980 PERIOD.

Japanese people management is one of the most affective HRM systems. Between the period of 1960 to 1980 the Japanese firms followed the ‘People Oriented’ HRM system. This HRM system has five unique characteristics: Selection and development, Lifetime employment contract, Consensus decision- making, Seniority-based rewards and Enterprise unions. (Kishita, T. 2006).

Selection and development: They hired the high school graduates and university graduates. The employers invested in education and training of employees. Employers assumed giving training in personal relationships for graduates would be more helpful. (Galbraith, J.R., & Nathanson, D, 1978)

Lifetime employment contract: The lifetime employment system was another mechanism to get more employees committed to their work. The employers could not provide all of them with managerial position because the number of managerial positions in an organisation was limited. However to increase the enthusiasm for the jobs, they set up some related companies and transferred the people to the company with the high level grade. (Kishita, T. 2006)

Consensus decision-making: The employers paid a basic wage based on the ability of their employee to perform jobs. Employers adapted ability based grade system. According to this, employers abstracted the abilities to execute the jobs in the companies, and rated and ranked those abilities, and consequently the basic wage was given. This process was reviewed every year. (Kishita, T. 2006)

Seniority-based rewards: Employers offered several kinds of ‘red carpet’ benefits for the employees according to the seniority level. They were provided with the hosing, tours, parties and sporting events.(Kishita, T. 2006)

Enterprise unions: Japanese enterprise based unions (kigyo-nai kumiai) have had a positive outlook in respect to salary negotiations. The negotiations were with preference on job security for their members. (Selmer, 2001). The unions provided supportive behaviour and with the integration of firms training, wage setting and redundancy systems. The firms could depend on the role of planned business as last option if union did not commit to its side of agreement.

HRM OF JAPANESE FIRMS IN 1990S.

The global competition of the 1990s changed the view of HRM systems. The firms re engineered their HRM system to become more competitive. Some companies began the introduction of ‘performance oriented HRM’ rather than ‘people oriented’ for the better results. ( Imano, K. 1998)

The employers reduced the intake of freshmen due to excessive level of labour, which encouraged employers to abandon the tacit contact of lifetime employment. Employees reduction was done through attrition, early retirement and outsourcing of manpower.( Imano, K., & Sato, H. 2002)

All the benefits provided by the firms for the employees were taken back to decrease the cost and increase cash revenue. Allowance for meal and transportation were taken back. ( Kishita, T. 2006)

Good performers were paid more by the means like bonus and other incentives rather than the less performance employee. Japanese legislation also promoted the trend of performance oriented HRM. ( Kishita, T. 2006)

Break down of traditional unions, business associations and keiretsu networks changed enterprise unions.( Salmer, J. 2001)

CONSEQUENCES OF SHIFT IN HRM FROM PEOPLE TO PERFORMANCE ORIENTED:

The Japan management association survey results show that 70 percent of the companies that introduced the performance oriented system were reviewing the system why it did not work well. The survey revealed that performance oriented HRM system had four significant problems. (Japan Management Association, 2005 )

Senior management could explain the purpose of introducing the system. The public thought that it was to change personnel cost from fixed costs to variable costs. The employer point of view was for organisational competitiveness.

(Kishita, T. 2006)

The management by objective system had inherent systematic problems. The system is an appraisal framework in which employee is evaluated based on objective criteria at beginning of evaluation period. But, this could not add to the link to the extent of value added company achievements. The price of the goods or service is determined depending on the balance of supply and demand, and not necessarily linked directly to the excellence of the jobs that workers have done.

(Kishita, T. 2006)

Evaluation process: The employers evaluated the employees relatively rather than individually. Some people lost interest and commitment for the job due not acceptable evaluations for good work performance.

(Kishita, T. 2006)

Extinguishment of informal opportunities for education and training. The training from senior staff to junior staff was as they could replace them one them with better performance. This created gap between the senior staff and junior staff.

As a result, the transfer on internal knowledge, technology and expertise, specific to the firm, was restricted. (Kishita, T. 2006)

Global division

Mother-Daughter

International division

Less hierarchical

Matrix

US, EUROPEAN AND JAPANESE STRUCTURAL CHANGES

US firms

European firms

Japanese firms

Number and dispersal of foreign units/subsidiaries

DIFFUSION OF JAPANESE MANAGEMENT

Japanese and American management is 95 percent the same and differs in all important respects. (T. Fujisawa, co-founder of Honda Motors Co)

The term Japanization describes the process of direct investment by Japanese multinationals in the UK, USA and around the globe. The interest for the Japanese management and organization was there in North American researchers. (Keys and Miller, 1984)

Factors fuelling the diffusion of Japanization :

There are many factors responsible for the current academic interest in the Japanese management. The four most important factors for the ‘love affair’ of many countries managers with Japanese techniques and philosophy are global competition, the limitations of the Taylorist-Fordist production paradigm, the application of new technology requiring a skilled and cooperative workforce, and the success of Japanese paradigm.

Global restructuring and competitive advantage: Increased global competition affecting international business. Increase of capital and movement of European community towards a single integrated market, abolishing all social, industrial, technological, fiscal and monetary barriers to movement of capital, commodities.

On the other hand, European and Northern American capital is moving towards an era of ‘disorganized capital’ and a shift from taylorist to a flexible form of work agreements. (Costello et al., 1989: Lash and Urry, 1987).

Limitations of the Taylorist-Fordist Model: The barriers have enumerated by Littler and salaman(1984). They include the coordination and control costs, economic and technical limits, increasing cooperation costs.

Modes of excellence: The current fashion of Japanese industrial management was stereotyped. (Pascale and Athos, 1986).Poor management was the reason for the decline in the manufacturing process of Britain. Comparisons were made with respective to the Japanese management, which provided Japanese management practices as a role model. (Gordon, 1988).

The Japanese Paradigm: They follow three indivisible and interdependent elements for the manufacturing: flexibility, quality and minimum waste.

Flexibility or Kaizen: Kaizen is the Japanese term for ‘continuous improvement’. It is attained in two ways: By arranging machinery in a group or a cell and by use of flexible multi skilled workforce. According to Schonberger (1982), the cellular system of production has many advantages. First, functional and numerical flexibility. Second, encourages cooperation amongst the group which forces problem solving and quality improvement. Third, improves quality control by taking responsibility for substandard work. In the cellular manufacturing, within a functional process layout, we can reduce floor to floor times by reduction in batch sizes and reducing set up times through SMED.

Figure 1
A Job as a System to Produce Value

Source: Research and practice in Human Resource Management.(2006)

The establishment of Kaizen improvement requires certain points:

Culture: It is part of organisation that is looking for the betterment. This isn’t to say that we can no longer enforce discipline, resist excessive wage demands. The main point is being a culture of respect and value.

Ongoing Management Commitment: To many improvements initiative fails. The commitment to single issue would be more for a short period of time and its continuous improvement is done.

Rewards: The rewards were given for the best performers and another form of reward is to give respect.

Training: Ongoing training throughout the organisation is the best practice to achieve the task. Training provides employees to think they are valued.

Communication: The communication of ongoing improvement is to be done by notices on walls, formal, briefing sessions and personal talking of senior level management.

At Nissan Motor Manufacturing (UK) Ltd, expanding all jobs as much as possible and developing of capabilities of the employees with respect to the efficiency and effectiveness of the work area. (Wickens, 1987). The company decreased the number of job titles so as to achieve maximum flexibility. At Nissan there were only two Job titles ‘manufacturing staff’ and ‘Technicians’ for the car plant production staff.

Ford (UK) maintained 516 job titles of different manual worker till 1985/86. There are number of cells situated within the same plant, but the cells are semi-autonomous, operating as mini-factories with an internal market.

Toyota suggested a award ceremony, at which the recipient was thanked for his contribution executive level staff. The rewards were not directly linked to the achievement of savings or to the rewards.

Minimum waste or Lean management: The objective of lean management is to manage the business backward from the customer definition of value-not forwards from your assets and organisation .To create an end to end and shares primary processes to design, deliver and support this value. (Daniel T Jones, 2004).It is achieved by the key element called, Just-in-time(JIT). JIT is a system in which stocks of components and raw materials are kept to an absolute minimum; they are delivered in a matter of days or hours before use in production process. (Schonberger,1982).

Heightened Awareness

Waste/Quality Control

Reduced Costs Labour/ Materials

Less Inventory

Smaller Batch

JIT

JIT PROCESS Outcomes

Source: Adapted from R. Schonberger (1982).

Toyota applied the principle of restocking which was been used in a supermarket for restocking the shelves just after customers bought the goods. For JIT production to operate effectively it is necessary to have relatively work flow ( Burbidge,1982); total quality control and fast machine set-up times. Toyota had seven principles of production system.

Reduced set up times: The employees were trained to their set ups using carts. It slashed its setup times from hours to months.

Small-lot production: Production of large batches requires high capital cost, high machinery, extended lead times & large defect costs. They produced variety of quantities in small number. ( Schonberger, 1982)

Employee involvement and empowerment: It organised their workers as a team for specialised work. The team leader looks of the team performance and needs.

Quality at the source: The defects were removed at the initial stages as the workers are easily accessible to the defects.

Equipment Maintenance: The primary responsibility was to look after the machinery if there are any malfunctions. The workers are trained for equipment maintenance.

Pull production: To decrease the holding costs and lead times, the quantity of work performed at each stage of the process is dictated solely by demand of materials.

Supplier involvement: suppliers are treated as partners of TPS. They were trained to produce best results.

Quality Control or Poka Yoke system:

According to Wickens,’ everything you hear about Japanese attitude to quality is true’. (Wickens,1987). According to Shigeo Shingo,’ poka means inadvertent mistake that anyone can make’ and ‘yoke means to prevent or proof’. The Japanese manufacturing is a network of two interrelated structures (Shigeo Shingo, 2005)

The process structure: The flow by which raw materials are converted into finished goods.

The operation structure: The action taken on materials. Preparation and after preparation adjustments, principal operations, Marginal Allowances are categories occurring in this stage.

In Japan, the total quality was controlled by monitoring the quality during production. The feedback on defects will be fast in the early stages. In addition, with TQC there are savings on labour and raw materials. (Schonberger, 1982). In contrast to Japan, The Britain and North America the inspection process is separate and performed by quality inspectors.

During the 1973 oil crisis, Toyota and other company sales were down. Toyota came up with new idea of asking the employees for all the cost cutting ideas they could think of that did not require major investment. Nearly 247,000 ideas were given. Toyota mainly emphasized on actions rather than ideas (Alan G. Robinson & Dean M. Schroeder, 2004).

Over time, Toyota introduced training programs to help employees come up with many more ideas and the quality of work is of zero error. The programs showed them how to improve their specific tasks, productivity and safety. Some of Toyota’s activators are as follows: (Alan G. Robinson & Dean M. Schroeder, 2004).

Poka-yoke or error – proofing.

5S or rigorous house keeping

Quick changeover( QCO)

Total productive maintenance( TPM)

REASONS FOR INTERNATIONAL WORKABILITY OF JAPANESE HRM

The Japanese firms try to introduce Egalitarianism, attention to detail, emphasis on teamwork, strong discipline, and 5S movements of the organisational climate.

M. White and M.H Trevor, reported that British labourers appeared to accept Japanese work Practices, waking up England’s work ethic.

The three reasons that motivated the work force are:

The number of opportunities for workers participation increases. In America the employees are treated as machines. In Japanese, people were treated as human who are using their minds while working.

The leadership found among Japanese supervisors, characterised by initiative-taking and example setting. In American and European companies the leader were much separated from the employees. The support was less. (M. White and M.H Trevor)

It is a rational system which meets production needs. The cooperative relation between the employees was good. Productivity was increased and defectiveness was decreased.

DISSATISFACTION WITH JAPANESE- STYLE MANAGEMENT

According to Hayashi kichiro, the following are the criticisms made by American managers working for Japanese companies in the USA.

Objectives are not clearly presented.

Decision takers are Japanese.

Promotion was on the basis of racism.

Many time consuming meeting, where people not concerned directly are also requested to attend meeting.

Explanation of logic behind the methods adopted by Japanese was not clearly understood by Americans.

Local managers were not included in the consultation with the Japanese managers.

The method of performance evaluation, compensation and promotion is usually vague and difficult to understand.

The initial salary is low and the pace of salary growth is slow.

The Japanese language was the problem.

The jobs were not easy to understand.

Foreign subsidiary has insufficient strategic autonomy.

CONCLUSION:

Japanese firms are compelled to compete in global markets. In the early decades the HRM was people oriented where employers provided long term contract, paid on seniority basis. Growing markets in the later decades enabled employers to make a benevolent cycle in which pay was based on the performance. Due to growing of the markets, available funds were decreased. Consequently, Japanese employers introduced performance oriented HRM where wages were paid on contribution to organisation. The reason for the functional failure of the performance oriented HRM was relative evaluation for employees, employers transferred market risk to the employees. The performance oriented was theoretically justified, but poorly operated.

The diffusion of Japanese HRM in the USA, European Countries plants was done. The factors influencing the diffusion were discussed where the Japanese paradigm was the main key factor. The European work force was more interested by this system. The new performance oriented HRM brought the gap between the white collar and workers. The elements of manufacturing are discussed with kaizen, lean management and Poka -yoke systems where these revealed most important for the success of the organisation. The Toyota established JIT and TPQ and employers were trained for new techniques. The Japanese HRM was not adopted in the European countries due to the Cultural effects, low wages and other performance oriented factors.

REFERENCES

Galbraith, J.R., & Nathanson, D. (1978). Strategy implementation: The role of structure and process. St. Paul, Minn: West Publishing.

History of Japanese hrm (2006). Retrieved from research and practice in human resource management, The HRM of Japanese Firms in the Days to Come of Global Competition. Accessed on 25 july,2009 ,from http://rphrm.curtin.edu.au/2006/issue1/japanese.html

Imano, K. (1998). Wage reengineering to survive in fierce competition, Tokyo, Japan: Nihon Keizai Shinbun, Japan.

Imano, K., & Sato, H. (2002). Introduction to personnel management, Tokyo: Nihon Keizai Shinbunsha

Japan Productivity Center, 1993. Japan Productivity Center/Nihon Seisansei Honbu (JPC), Katsuyou Roudou Toukei (Handbook of labor statistics). (1993).

Japan Productivity Center, 1994. Japan Productivity Center/Nihon Seisansei Honbu (JPC), Katsuyou Roudou Toukei (Handbook of labor statistics). (1994).

Japan Management Association, (2005). News Release. A Survey on performance-oriented HRM. Available http://www.jma.or.jp. [2009, July 22]

Salmer, J. (2001). Human resource management in Japan- Adjustment or transformation?. International Journal of Manpower, Vol 22, Iss.3, pp.235-242.

Toyoto Idea Factory, (2004). Why organizations never run out of improvement opportunitiesacccessed on 26 july, 2009 from http://www.electrifyingtimes.com/toyota_idea_factory.html