1) The document examines how production models in the US and Japan affect employment strategies in the automotive industry through an analysis of different levels - micro, meso, macro. 2) It discusses differences in the organizational modes and human resource management policies between Japanese and American automakers, with Japanese firms using modular production systems, long-term employment, and reciprocal commitment compared to American firms. 3) The document proposes several hypotheses to test the relationships between production models, developing core competencies, and employment patterns between the two countries.

1. 30/05/13 HRM models and theories 1
INDUSTRY DYNAMICS >
HUMAN RESOURCE MANAGEMENT >
EMPLOYEE CONTRACTING
“Linking production models with employment patterns, in the automotive industry.
Another angle on how employment adaptation strategies are drawn.”
Course: Managing Human Resource Flows (194120090)
Document: Capita Selecta – Individual Project
Author: Dimitrios Kordas (MSc)
Enschede, 30-5-2013

2. 2
Abstract
• Does really production models in USA & Japan affect
employment strategies of car manufacturers?
• Is an institutional analysis (micro, meso, macro – level)
sufficient to explain the evolution of Japanese long-term
employment and the American private social welfare?
• What are the gaps that a production-driven approach can
address look on HRM policies and employee contracting?
• Why, the Japanese organizational mode seems to be
more productive, more flexible and more profitable
comparing to the American one?

3. 33
Research goal
“To examine whether and how the production model followed
by the automotive firms operating in Japan and in USA affects
their employment strategies.”
Notions used:
 Product Architecture: Modularization vs. Integration
 Employee Contracting: HR-architectures

4. 4
Introduction
Old technology New technology
Developing
Capabilities
Transformi
ng core
competenc
es into
core
products
 On which products exactly do automotive firms compete?
 Why do firms differ so much in terms of profitability?

5. 5
Literature review
JAPAN USA
Labor mobility Low High
Unemployment rate Increased Declined
Wage differentials among workers Smaller Bigger
Table 1. Mobility – Employment – Wage differentials (Hattori & Maeda, 2000)
Organizational mode Japanese American
HRM Policies
Sources
Abbeglen (1958)
Dirks et al. (2000)
Hamaak, Hori, Maeda, & Murata (2011)
Hirano (2013)
Jacoby (2005)
Kato (2000b)
Moriguchi & Ono (2004)
Nitta & Hisamoto (2008)
Okada (2012)
Recruiting at any level
Pay for specialized skills
Individual bonuses
Use of hierarchy commands/standards
for information processing
Market-oriented decentralized personnel
management (DP)
Job-based ranking policy
Standard evaluation and development of
specialized skills,
DP: as a business partner trying to
succeed to the four roles defined by
Ulrich (1997)
Competencies-Triad (Boudreau &
Ramstad, 2007):
- Business knowledge
- Delivery of HR practices
- Technology expertise
Recruiting at the bottom
Pay for roles potential abilities,
Work group bonuses
Inter-department communications &
strong union participation
Company optimization-oriented
centralized personnel management
(CP)
Ability-based ranking policy
Intense in-house training
CP: as a complement to an internal
labor market, Mass-hiring of graduates
Competences:
Knowledge of the various divisions
within the firm and development of a
broad network of connections

6. 66
Institutional analysis
Level of analysis TOYOTA-style GM/FORD-style
Macro: Government Competition transparency
Personal rights protection
Open to women employment
Strict labor market regulations, union laws
and social welfare policies (Moriguchi &
Ono, 2004)
The Nikkerein Initiative (1995) Close to
women employment
Meso: Organization Manufacturing operations
Concentrated production
High inventories
Use of local workers’ knowledge
Product improvements
Corporate Strategy
Competition leader
Reinvestment in external activities
Short-term buyer/supplier relations
Manufacturing operations
Higher spread productivity growth
Transplant investments
Low inventories
Lean operations
Corporate Strategy
Growth and market share oriented
Reinvestment in personnel
Long term buyer/supplier relations
Micro: Society Personal (vertical) promotions,
opportunism, high-class education and
prestigious institutions lead to prestigious
companies
Loyalty, trust, commitment
Social exchange relations (horizontal
promotions)
Low impact of institution’s reputation on
employment

7. 7
Product Architecture: Source of technological
innovation
Technology trajectory Product platforms
• Performance improvement
• Diffusion
• Change of interest
Innovation: Types - Patterns - Technology cycles

8. 88
Organization strategic direction
 Core Competences (CC): the point on which manufacturers, try to
build, borrow, buy, bounce, or bind capabilities, as fast as possible to
super-pass their competitors (Prahalad & Hamel, 1990).
 Companies, even from the same national context, differ on what they
do compete!
“Prius”: Aggressive
collaboration,
Partially Borrow &
Partially Buy
capabilities
“Prius”: Aggressive
collaboration,
Partially Borrow &
Partially Buy
capabilities
“Insight”:
Transferring &
Training to build
capabilities,
Redeployment
employment
startegy
“Insight”:
Transferring &
Training to build
capabilities,
Redeployment
employment
startegy

9. Source: (Lepak & Snell, 1999) 9
HR-Architectures

10. Source: (Prahalad & Hamel, 1990)10
Business portfolio vs. Competences portfolio
“Capabilities portfolio”
CHRYSLER (after ’60s)/FORD
(after ’80s)
 Hand-in-Hand training
 Learning through specific-
components partnerships
 Competition on
transaction-specific skills
(Jones & Hill, 1988)
“Competences portfolio”
TOYOTA
 Collaborative training
 Accumulative learning
shared with partners
Long-term competitiveness
“Job portfolio”
GM (2008)
 No in-house training
 R&D direct adoption
 Competition on price
“Business portfolio”
HONDA
 In-house training
 Accumulative learning
stays inside
 Short-term
competitiveness
Price/Cost (efficiency)
Performance
(Responsiveness)

11. 1111
Supply Chain learning: Transaction Costs approach
 Factor prices
 Resource availabilities towards Resource Based View
 Market situation
“The World of Contract (Williamson, 1985)”
Contractual
interfaces
Continuity
Adaptability
Real economic valueoffer

12. 1212
TOYOTA Supply Chain: A “best practice” example
 Strategic supplier segmentation
 Partner-model
 3-level concentric supplier management (Fig. 1) employee
portfolio (Fig. 2)
 Common destiny: high relational mutuality & high HR-superiority
Fig. 1: Strategic supplier management (Dyer et al,
1998)
Fig. 2: Nikkerein employee portfolio proposal
(Nikkerein, 1995)

13. 13
TOYOTA personnel segmentation

14. 14
Why supplier segmentation?
 Increase numerical (cost) flexibility
 Establish individual and performance-based initiative
 HYBRID (Japanese) organizational mode (Hirano, 2013)
Ranking policies: Ability-based + Job-based
 Transplant case National and Societal factors
JAPAN USA
- Homogeneity - Diversity
- Social welfare corporatism - Unrestrained market
- Familism - Individualism
- Paternalism

15. 15
Corporate Strategy
Modularization
Integration
Job-designSet the bottom line of
 JAPANESE-strategy
 Highly modularized mass-market
 Develop as fast as possible VRIO capabilities
 Lean production system: Triple segmentation
 Reciprocical commitment (Cole, 1979)
 Horizontal promotions, irrespective the seniority level
 AMERICAN-strategy
 “Inner” & “Outer” workforce segmentation
 Centralized ownership
 Not full acquisition (not squeezing the lemon)
 Lateral promotions for highly-skilled engineers

16. 16
Summary: “A purchasing approach and
Hypotheses to be tested”
Internal labor market Long-term/Hybrid
External labor market Short-term/Task relatedEfficiency (productivity)
Responsiveness (variety)Customization
Mass-production
Production model Operating perspective Developing CCs Employment pattern

17. 17
Hypotheses to be tested I
 H1: “If mobility will increase – in transplant case – and
unemployment will decrease, then profitability will increase.”
 H2: “Given that job tenure in Japan is decreasing, then the
number of flexible workers will increase to the extent the
contacting costs of core and specialized employees will be
reduced, respectively.”
 H3: “The rate of employee development is positively related
to the bottom turnover for each position.”
 H4: “The customization costs are positively related to the
annual firm profitability.”

18. 18
Hypotheses to be tested II
 H5: “The transfer frequency of an employee is related to his/her
commitment negatively in USA and positively in Japan.”
 H6: “The wage differentials – for university graduates – for both
organizational modes are linearly expanding with the seniority level.”

19. 1919
Limitations
 Complementarity and Duality principles are not analyzed
 Labor data: not used (qualitative approach)
 Productivity measures: not taken into consideration
 Trade/Labor unions: not considered as crucially employment
shaping factors
 New employment models (e.g. pay-for-jobs, pay-for-
accountabilities): out of article’s scope.

20. 2020
Further discussion I
Model 1. Testing the relationship between Physical & Human Capital investments with
the Production Organization Index

21. 21
Further discussion II
Model 2. Efficient contract organization (Control vs. Commitment HR-systems)

22. 22
Thank You !