ARE WE MOVING FROM COMMITMENT EMPLOYMENT TO SHORT TERM TRANSACTIONAL EMPLOYMENT?

1. “(It is) readily apparent (that) the old ‘employment contract’ is no longer sustainable; the past decades .. downsizing and reengineering efforts mark a systematic and permanent change in the relationships between corporations and employees.” Corporate Leadership Council, August 1996 “The overarching trend in employment relations is to make everything ‘contingent,’ from jobs to benefits to organizational relationships.” Former U.S, Secretary of Labor, Robert Reich October 1997 ARE WE MOVING FROM COMMITMENT EMPLOYMENT TO SHORT TERM TRANSACTIONAL EMPLOYMENT?

2. 1945 - early 1980’s Econ. Environment stable U.S. the major economic power regulated sectors with generally stable revenue and profit stream little foreign competition Human Resource Mgmt. Routine Early 1980’s - Present Econ. Environment uncertain Multiple economic power centers in the world (e.g., Europe, Asia) deregulation of major sectors foreign competition Human Resource Management Contributor to firm success Post World War II Environments for Human Resources

3. Employment Relations Strategies • Traditional Strategies • Long-Term Labor Purchase • employees hired so long as they performed well and firm financially able to maintain position • New Strategies • Workforce Commitment Model • job security, investment in employees, maximize employee value added • Labor Transactional Model • direct labor cost minimization • Mixed Model • use of both models for different employee groups

4. Employment Models Cost Minimization Employee Investment Workforce Commitment Model Labor Transactional Model

5. Employment Models Cost Minimization Employee Investment GM-UAW (mid 1998) Ford-UAW (mid 1998) Workforce Commitment Model Labor Transactional Model

6. Variation Exists in the Employment Relationship; People-Centered Strategies Exist! • Some firms believe their competitive advantage is talented, motivated professional people who care! • Commitment strategies provide implementation capability comes from an organization’s people, how they are treated, their skills and competencies and their efforts on the firm’s behalf. • J. Pfeffer: 1998: The Human Equation.

7. Example: Starbucks: More than Just Coffee Beans! • Mission Statement: • Provide a great work environment where we treat each other with respect & dignity • Embrace diversity as an essential component of how we do business • Apply highest standards of excellence to purchasing, roasting & fresh delivery of coffee • Develop enthusiastically customers all the time • Contribute positively to communities & environment • Recognize that profitability is essential for future success

8. Staffing of Committed HR Played a Key Role in Starbucks’ Growth Strategy • Not only great products, but the atmosphere they created; key to creating a warm & inviting place is great people • Turnover 65%; often double in restaurant industry • All start at $6.25 ($2 better than minimum wage) • All partners who work at least 20 hours per week get full benefits • Bean stock, granted at 14 % of base pay; after 2 splits now, opportunity to build wealth at Starbucks is real

9. Way Partners are Treated Makes Supreme Difference in How They Treat Customers • HR policies and procedures designed so partners come first; assumption is great customer service will follow • Training/Orientation • Each new partner goes through 24 hours of orientation in retail skills, customer service, home brewing & coffee knowledge • Each market (100 stores) has a learning development leader ; responsible for quality assurance of core training & succession planning for talented partners • Promotion from within

10. Model for Understanding HR Strategy: Context, Roles, and Constraints

11. Fig. 1.1A: Application of Decision-Making Framework to Common HR Decisions Selection of Arbitrator Payment per FLSA min. wage & overtime Hiring Decision Entry Level Explain benefits outsourcing Explanation of FLSA to mgt. & employees Summarizing Coll. Bar. Agr. Retirement Benefits Change Negotiating Retirement Plan Adjustment of sick leave policy to FMLA Merger and Acquisition Change LR Strategy Culture change with EEO law, mid 1960’s

14. PROS Amortize costs of training Ease of performance evaluation Incentives may work better since both employer and employee assume a long-term relationship Greater loyalty to employer/co-workers Greater job assignment flexibility and willingness to work overtime Enhanced social and intellectual capital over time CONS Risk of variable demands for labor Dark side of loyalty Dysfunctional behavior possible; problem of deadwood Familiarity can breed contempt Difficulty in getting rid of workers when not needed Risk of skill gaps Pros & Cons of Employment Relationships

15. Advantages Person employed under a model most appropriate for their contribution to the firm “Best of both worlds” Disadvantages Differences among similarly situated employees can cause morale and equity problems Long-term sustainability? American Airlines UPS Two-tiered wage structures Mixed Model: Core/Non-Core

18. Instructions • Each member should take a piece paper from the envelope. • Read your role and think about how that person would react to the given situation. • Begin your discussion - The Manager of HR will act as the facilitator. • You will have 20 minutes.

19. Discussion • What are the issues of concern? What were your solutions? • How were the groups similar?Different? • What is the best way for an organization to handle this type of situation? • Discuss how HR decisions are made within a high-commitment organization versus a transactional approach? • Using the framework, what kind of HR decision making choices and roles are reflected in the overtime decision?

20. Kensi’s Results • Kensi had a team of management leaders from within the organization to investigate. • They initiated employee surveys and meetings (an Associate representative attended all management meetings, as well). • Because of the polarization involved with the two alternatives, Kensi implemented a third tactic. They started an entirely new line by hiring in more Associates.