The Impact of Company Human Resource Policies on Social Skills: Implications for Training Sponsorship, Quit Rates and Efficiency Wages
| DOI | http://doi.org/10.1111/1467-9485.00162 |
| Published date | 01 August 2000 |
| Date | 01 August 2000 |
| Author | Francis Green |
{Journals}sjpe/47_3/x182/makeup/x182.3d
Scottish Journal of Political Economy, Vol. 47, No. 3, August 2000
#Scottish Economic Society 2000.Publ ishedby Blackwell Publishers Ltd, 108 Cowley Road, Oxford OX4 1JF, UK and
350 Main Street, Malden, MA 02148, USA
THEIMPACTOFCOMPANYHUMAN
RESOURCE POLICIES ON SOCIAL SKILLS:
IMPLICATIONS FOR TRAINING
SPONSORSHIP, QUIT RATES AND EFFICIENCY
WAGES
Francis Green
ABSTRACT
The concept of a firm's human capital is reconsidered to include both the technical
and the social skills of its workforce. Technical skills are defined by the ability to
turn inputs into outputs, and measured by the productivity of unit labour effort.
Social skills are defined by the propensity to behave in a manner conducive to the
firm's objectives. In other words, social skills are constituted as the norm of effort
contribution to which an individual assents, and are measured by observed
motivation and behaviour. The existence for firms of a labour management
function is proposed and supported, relating social skills to human resource
policies. Implications for the labour market are that: (i) firms pay for general
training and, at the same time, wages do not necessarily increase with training; (ii)
human capital acquisition may not lead to an increase in quitting, even controlling
for wages; (iii) human resource policies substitute for efficiency wages or for
employee monitoring; and (iv) economies with high organisational commitment
have low equilibrium unemployment rates.
II
NTRODUCTION
While human capital is a concept that applies originally to individuals, it has
become increasingly common to talk of a firm's human resources in a manner
analogous to the consideration of its physical capital as comprised by its plant
and equipment. Conventional wisdom, based on human capital theory, takes the
firm's human resources to consist of the technical skills and the knowledge of its
employees. Training, which augments the knowledge and technical skills, is then
analysed with the usual apparatus of capital theory, with the additional
dichotomy of general and firm-specific skills. The aim of this paper is to propose
a broader perspective on what is constituted by a firm's human resources,
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University of Kent at Canterbury
{Journals}sjpe/47_3/x182/makeup/x182.3d
beyond what is implied by technical know-how, and to consider some
implications of this perspective for the operation of labour markets.
A wider perspective on human resources is motivated by two basic
observations. First, surveys confirm that employers have a complex view of the
qualities they look for in their workers and in their recruitment (eg, Oliver and
Turton, 1982). Qualifications and technical skill indicators are generally only one
part of the requirements, and are sometimes not so important. Indicators of
behaviour and attitudes are often considered just as important. Second,
substantial resources are expended by firms in the attempted modification of
employee behaviour and attitudes, as wellas to improving technical skills. Indeed,
the new discipline of human resource management is devoted in part tothe study
of these processes (see Storey, 1995, for a critical assessment).
If the important characteristics of a firm's human resources comprise both
technical and behavioural aspects, conventional models of labour markets based
on assumptions of fixed effort are limited in what they can account for.
Realisation of the importance of employee behaviour variations has led
economists to consider these as incentive responses to variations in the
monitoring environment and in contractual regimes, about both of which there
is now an extensive literature (embodied in modern texts such as Milgrom and
Roberts, 1992). Alternatively, norms of employee behaviour may be seen as
determined by other workers' efforts or actions (eg, Aoki, 1984; Liebenstein,
1982; Kandel and Lazear, 1992) or by wage fairness (Akerlof, 1982). This paper
is in the spirit of this alternative approach in that it focuses in part on employee
norms. However, it extends the approach by assuming that it is possible for
firms to influence the preferences of their workers.
Apart from simplicity, this approach has the advantage of being consistent
with employers' perceptions of concern with employee attitudes and their partial
attempts to mould them. The main new assumption is to propose the existence
for firms of a labour management function, relating employee preferences to
human resource policies. The essence of this strategy is that firms expend
resources in order to affect each of three dimensions of workforce performance:
(a) the technical skills of the workforce, that is, their ability with given effort to
turn input into output; (b) the effort they choose to devote, for any given
monitoring intensity and set of financial incentives; and (c) the likelihood that
employees will retain membership of the firm, again for given financial
incentives. One can think of these dimensions as constituents of a firm's gross
stock of human capital, defined as the present value of the revenue stream which
its contribution to production yields. In each dimension, it is unoriginal to state
that the wage structure affects the firm's human capital. Higher wages, for
example, may attract higher technically skilled workers, induce greater effort
and=or less quitting. What is proposed here is that, for every wage incentive
structure, the stock of a firm's human capital depends on employee preferences
that affect any or all of the three dimensions, and that those preferences may be
subject to some managerial influence. The objective is to interpret the
proposition in economic terms, and thereby to consider the implications of
this broader view of human resources for some standard models of the labour
252 FRANCIS GREEN
#Scottish Economic Society 2000
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