The OF factory was newly built on a Greenfield site in the late 1970’s; likely influence from the US partners would have resulted in a modern ‘state-of-the-art’ factory, with advanced working conditions. However 20, or so, years on this factory may be tired; the working environment has an effect of making workers feel valued, motivated and committed.
The technology is heavily automated so that, rather than a production-lines’ repetitive tasks, the roles at the lower end for employees focus on monitoring equipment. The perception of these monitoring roles, coupled with pay premiums in the late 1970’s may have meant that machine ‘operators’ saw their status as not merely production line workers. Perhaps the growth of the business, the widespread identification & publication of the key roles and lack of training has had an effect on morale. For the first five years, during the height of union power pre-Thatcherism, there were ‘less than a dozen union members,’ the implication is that there are now more union members, which is indicative of the failures of the Advisory Board.
The contract workers are not represented at any point in the ‘consultative system.’ The contract workers make up 24 out of 168 manufacturing employees, and 5 in computer, so perhaps as much as 10% of the workforce is not represented. This is a potential issue; disenfranchised employees may represent their own views in impromptu forums throughout the business planting a seed of dissatisfaction.
Problems & Proposals
Pay Problems There are a number of identifiable pay issues. Pay is related to the length of tenure in roles & there is no salary link to seniority, promotion and performance; an annual flat figure profit-related bonus across all levels is paid; boredom is a problem for low level workers and the pay premium diminishes over time.
Proposal OF could redefine each ‘job level/scale,’ specifying the new job requirements and pay. This could be implemented through a pay freeze for the lower skill workers who are already receiving a salary above their ‘skill’ level – those that don’t need to be paid over market value and take current pay premiums for granted. These workers are not mobile, and are replaceable through the local labour market (market/industrial system). The workers without the requisite skills would not achieve bonuses or annual salary increases until they were fully qualified for their roles. It would be possible to realign worker mindsets to achieve bonuses based on the performance of their shift, relative to the other three; rewards being attributed through relative shift performance and error minimisation measures, leading to a culture of fixed basics and performance related pay. Additionally low level workers would benefit from the return of socialisation, camaraderie and group/team values.
The issue of boredom for monotonous tasks is difficult to deal with; though introduction of the competitive element, structured training targets and ‘soft benefits’ may help. Soft benefits could replace the ‘annual bonus,’ with quality of work-life improvement schemes. The flat bonus could be replaced with; a workplace gym, crèche, bar, restaurant/cafe etc, in lieu of annual bonus (£1,000 bonus * 350 = £350,000); though this on its own does not address the job security element of employee commitment. Temporary contracts, certainly for computer workers, normally require pay premiums. The trade-off on bringing these temporary contract employees onto permanent contracts would be their representation in the ‘consultative system.’
New employees are attracted through ‘upper-quartile’ salaries, the salary then starts to reduce relative to market rates as a mandatory bonus is paid and the Advisory Board fails to adjust salaries appropriately. An independent remuneration committee would ensure that the 50 ‘world standard’ employees are retained, that their pay rises are not based solely on length of service and they do not become disillusioned. The company could reward these ‘global employment market’ workers with profit-related pay to encourage over-performance. This is potentially divisive but if other employees have their own success-related bonus schemes they also feel empowered to control their bonuses. Part of all pay packages could include a training element instead of salary.
Training And Career Development OF has stopped systematic training & there is lack of management training and development. The ‘Single Status’ condition of workers is a fallacy; with job titles differentiating between engineer and assistant engineer, and the list of indispensable roles excluding managers. If the company lost key personnel (death, resignation & retirement) the policies are not in place to transfer/share these skills, the company is open to being held wage hostage. There are costs associated with untrained people needing more supervision. New hires may be working on systems that are up-to-date whilst older hires look at jobs from older perspectives; the business needs everyone at the same level. Additionally monitoring systems is boring for operators & also high pressure without much job discretion, exacerbated by no job rotation at lower levels so that employees are pigeon-holed.
Proposal Define training needs, utilising a professional HR Manager (& Organisational Development Consultant), mandate best practices, set-up a team from different functions and analyse what is needed by systematically looking at the jobs. Train a key person to manage the whole process then ‘cascade train’ the organisation, this ensures a systematic, consistent and in-expensive approach. Implement policies including; goal setting, performance appraisal, reward systems, career planning and development, managing work-force diversity and employee wellness. The training would be broadened to not only encompass things that the company knows how to do, but also to focus on those that add value for employees leading to a resetting of goals and definition of the HR Strategy of the business. This would include different psychological contracts for different groups, balanced with awareness that differentials can cause issues and the process needs to be tracked and modified over time. The job security issue should not be a significant issue affecting employee commitment, they are looking to build a new factory indicative of success and not downsizing, but they need to focus on developing employees. A move back towards a ‘relational contract’ away from the current ‘transactional contract’ (Hendry & Jenkins) would pay dividends for FO. This sees a scheme where ‘the setting of personal objectives is derived from business objectives, the evaluation of performance and linking development and rewards to evaluation.’ (Hendry, 1995). The different groups of workers highly skilled/low skilled operate in different systems; broadly the organisation has the potential to consolidate as a ‘commitment system.’ Refurbishment of the new site could give workers the necessary commitment from the organisation re permanence and FO workforce commitment. Makes employees more mobile and more employable gives them security, they are happier with their side – restores their confidence. It is more difficult to dismiss these investments if they are in hand with investments that show concern for employees’ continued viability as professionals – at an apparent risk and cost to the company which generates a reciprocal commitment. Investments in things the company does not already know are more likely to generate innovation. Multiplier effect as this is mimicked throughout the business and becomes the new culture of the organisation.
It is very important to manage expectations so as not to destroy the existing psychological contract; this means that the proposals to deal with the problems of Pay, Training & Career Development and Management Structure and Teamwork need to be integrated slowly and progressively. It is important to bear in mind that good HRM will not guarantee economic success. ‘Consultation (with employees) on any new work,’ directs involvement rather than representative involvement a psychological contract is personal. Kanter argued, ‘that everyone can gain greater control through employee involvement.’ ‘Genuine involvement leads to greater commitment in tasks,’ (FT, 2003). Involve employees in the achieving the goal representatives sorting out pay, hours and job security. Hijack the Advisory Board. Greater commitment could be generated if employees are involved in the Kaizen working practices.
Management Structure and Teamwork Managers are being bypassed; the culture of the organisation is to talk about teamwork, though there is not a lot of evidence. The only real teamwork is the top team of Managers tight-knit together since the start; the reality is functional silos with middle management not focusing as a team. The exclusion of middle managers, from the ‘key roles’ of the business list, is de-motivating and commoditises these key individuals. Highly technical team strong functional areas reporting up only connection is through the top team. Communication issues arise as managers find out key information at the same time as employees when they are the ones that need to action the information.
Proposal Quality circles, self-managing teams, become value creators to retain staff. US Parent put pressure on them for Total Quality management/quality circles, they should implement these. The commitment scheme they think they are creating does not tally with the reality so they need to understand the reality. There are all manner of HR/OD strategy & tools to deploy at this stage; including those to improve communication & performance through Kaizen (employees put ideas forward).
Conclusion
The focus of the proposals is to generate greater employee commitment, by dealing with the three issues currently experienced with the psychological contract between OF and OF employees. The employee commitment issues in the Optical Fibres case that have been identified and addressed through my proposals include:
- Job security & progressive, adaptive company approach to employees.
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Quality of the supervisory relationship and company's leadership
- Favourable developmental opportunities & training
- Participation in goal setting & individual empowerment
- Sufficiency of pay, benefits, rewards & promotional opportunities
- Clearly stated guidelines defining appropriate work behaviour and job demands
- Receipt of performance feedback & justice in performance-appraisal decisions
- Supportive communications with immediate supervisors and upper management
- Job quality - ‘If you want people to do a good job, give them a good job to do.’
- Evaluative and objective measures of performance.
References
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October 1, 2003.
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Hendry, C (2004). ‘Human Resource Management Handbook 2003-2004.’ Cass MBA 2003/2004.
Hendry, C. & Jenkins, R (December, 1995). ‘Psychological Contracts and New Deals.’ Human Resource Management Journal, Vol. 7, No. 1.
Herzberg, F. (1968). ‘One More Time: How Do You Motivate Employees?’ Harvard Business Review 46 (1968): pp53-62.
Kanter, R. M. (1989) ‘The New Managerial Work.’ Harvard Business Review, November 1989.
Lynch, P. D., Eisenberger R. and Armeli S. ‘Perceived Organizational support: Inferior Versus Superior Performance by Wary Employees,’ Journal of Applied Psychology 1999 Vo. 54 No. 4 pp 467 – 483
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