Monday, May 26, 2008

Achieving and Sustaining Competitiveness in the Global Era: The Case of Company ABC (Part 1)

ANTO COMETA

The rewards and costs of achieving and sustaining competitiveness in the global era are fundamental in the placement of interests both of the business and the workers. Advancements in technology alongside with the competitive nature of the market has led most if not all organizations to look for viable ways of augmenting its ability to perform in order to avoid extinction. Increasing the efficiency and productivity of the business which is generally reflected in the company’s capability to maintain its profitability and still sustain the needs of the business as well as its workers are the perceived elements for its survival. Altering the processes and structure of the organization are largely the utilized ways in response to the dilemma or challenges imposed by the situation. However, modifications in the existing structure and processes of the organization in order to adapt to the changing requirements of the competitive market have crucial consequences not only the workers but also to the business. Various issues and conflicts arise which most of time are unfavorable to both parties. Careful analysis of the rewards and costs may present possible ways and approaches on how to manage and deal with the conflicting interests of the business and the (different levels of) workers.

The circumstances presented in Company ABC - the current situation that’s being faced by the banking institution as well as its workers, could lead to potential problems wherein both could lose its footing in the product and labor markets. At the least, six (6) major interrelated and to some extent overlapping issues were identified. These put forward conflicting interests whereby each holds central stakes in the continued existence of the business or the organization; these are (1) general skills and competencies, (2) organizational overhaul, (3) business efficiency and profitability , (4) compensation and wage dispersion, (5) resource allocation, and (6) benefits distribution. Preventive measures or negotiated agreements should be explored and taken so not to come across these concerns or worsen the condition which could put the entire organization in the red.

The rewards and costs of achieving and sustaining competitiveness in the global era are fundamental in the placement of interests both of the business and the workers. Advancements in technology alongside with the competitive nature of the market has led most if not all organizations to look for viable ways of augmenting its ability to perform in order to avoid extinction. Increasing the efficiency and productivity of the business which is generally reflected in the company’s capability to maintain its profitability and still sustain the needs of the business as well as its workers are the perceived elements for its survival. Altering the processes and structure of the organization are largely the utilized ways in response to the dilemma or challenges imposed by the situation. However, modifications in the existing structure and processes of the organization in order to adapt to the changing requirements of the competitive market have crucial consequences not only the workers but also to the business. Various issues and conflicts arise which most of time are unfavorable to both parties. Careful analysis of the rewards and costs may present possible ways and approaches on how to manage and deal with the conflicting interests of the business and the (different levels of) workers.

The circumstances presented in Company ABC - the current situation that’s being faced by the banking institution as well as its workers, could lead to potential problems wherein both could lose its footing in the product and labor markets. At the least, six (6) major interrelated and to some extent overlapping issues were identified. These put forward conflicting interests whereby each holds central stakes in the continued existence of the business or the organization; these are (1) general skills and competencies, (2) organizational overhaul, (3) business efficiency and profitability , (4) compensation and wage dispersion, (5) resource allocation, and (6) benefits distribution. Preventive measures or negotiated agreements should be explored and taken so not to come across these concerns or worsen the condition which could put the entire organization in the red.


Issues, Interests and Positions

1. General Skills and Competencies

The organization recognizes the need to keep pace with the changing demands and needs of the business and the market. In the last three years of the bank’s operations, older employees have contributed less than the younger employees. This didn’t mean that they exerted less effort but simply due to the acquisition of the skills needed in handling the new banking technology. In the interview conducted it showed that those who are at their 30s to 40s (regardless of gender) want more skills training and competency upgrading. As for those over their forties want the company to find ways of maximizing their experience, rather than simply introducing potentially job-shedding technological changes.

It is of equal importance and concern to the workers and the business to continually upgrade the skills and competencies required in order for the organization at the very least to maintain its survival in the market. There are two probable positions that could be taken in order to address the concern relating to the matter. In so far as the set of skills and competencies needed, developing training programs is one of the options that could be taken. Another, which could be deemed as a radical move, those deemed performing below the satisfactory level could be booted out of the organization.

2. Organizational Overhaul

This includes re-forming or re-organizing the structure, processes and design of the organization. The organizational structure, processes and design characterize the roles and functions carried out by each worker and are representative of the vertical and horizontal relationships within the organization. Moreover, these outline the appropriate channels and approaches for strategic information flow and decision making. The bank worries about losing its competitive edge if more efficient ways of organizing the work process are not introduced.

Modifying the organizational structure processes and design to achieve higher organizational productivity both operational and financial which is the aim of the business is of significant concern of the management. This is the most likely position to be taken by the company in order to effectively utilize and gain higher control over these concerns.

3. Business Efficiency and Profitability

The main thrust of the business is to deliver and achieve bottom-line returns which are chiefly dealt with higher asset utilization at prominently lower costs. This is the idea behind the business’s asset management and successful profit realization. This is of utmost concern of the business. Previously, the bank was perceived as financially stable having five solid years of increasing its profitability. Moreover, it was seen in the high productivity of the workers – with every peso spent on the individual worker it yields five pesos of net income. However, with the situation that could subvert the financial stability of the business diagnosing which works effectively and what’s hampering the efficiency and profitability could be the management’s action towards the resolution of this particular dilemma.

Increasing the bank’s efficiency to generate higher productivity while maintaining or lowering the overheads is the most likely position to be taken. This could be achieved by taking out those employing labor flexibilization measures. This is to maximize the current set of resources that the organization have while minimizing the cost of operations.

4. Compensation and Wage Dispersion

Wage is deemed as a central driving force (but not exclusive) in the delivery and performance of individuals within the organization. Determining the tolerable wage differentials in so far as seniority, position and rank levels in the organization is concerned as well as being compensated for the output and performance carried out is of importance to the company but exceedingly to the workforce.

The significant contributions to the business and organization such as increased profitability, output delivered and performance carried out is perceived to be directly related to the compensation to be given out. It could be seen on the survey conducted which had shown concerns on the part of those workers who are relatively new which raised the idea of pegging pay to skills and performance. Moreover, the demand made by the junior officers to increase the salary differentials between them and the rank and file as well as to the senior officers to be narrowed down.

Disparity in wage levels has an effect on the productivity or efficiency as well as motivation on the part of the workers. This also posits a relational conflict in both horizontal and vertical dimensions. The most probable position to be taken by the organization would be to provide performance and skill-based pay as well as to increase the base pay given to the junior officers.

5. Resource Allocation

The basic allocation of resources is the preference of which items to finance, what level of support it would receive and which items could be left unfunded. More often than not, businesses would invest on units or groups which generate higher productivity and profitability than those which were not. Moreover, those classified as high profit centers in contrast to those deemed as cost or low generating profit centers are mostly likely to be given high priority.

This concern is of equal interest on workers and management. The most probable position to be taken by the management would be in favor of the demands made by those individuals or group which yielded high levels of productivity and made significant contributions in terms of increasing the bank’s profitability. Failure to provide the pleas could result in the decreased morale and motivation of those workers which could eventually lead to their decreased productivity which also affects the business’ profitability. It could also be the case (which is more likely to occur) that these workers would leave the company and transfer to other organizations even to the competitors.

6. Benefits Distribution

Benefits more often than not are considered to be part of the entire wage or compensation arrangement given to the workers. Companies recognize the value of benefit packages in the organization as key factors in the individual’s consideration for an employment opportunity, employee morale and motivation as well as reduction in staff turn over. Thus, the benefits offered in the organization are quite essential to the overall employment picture.

It was identified that there were different needs in terms of benefits acquisition in the organization. These vary depending on the age group and (civil) status classification of the worker - workers who are married want child-minding facilities as oppose to those who are still single who prefers to have programs for fitness and wellness; those in their thirties to forties yearn for more skills training and competency upgrading in contrast to those over their forties and fifties who want the Bank to find ways of maximizing their experience and would consider an early retirement program plus assistance in setting up their own businesses should they retire, respectively. Moreover, the position of the union in general is simply to improve what is currently being enjoyed since the workers deserve to be rewarded for their hard work which brought the organization to where it is today.

This matter is of high concern to the workers. The needs may differ but they are not necessarily conflicting. It could be perceived that the needs cited if taken all together have varying levels of significance and appeal to the worker. If the organization decides to grant the need(s) one group over the other, it could likely cause tension and discord within the horizontal dimension. The most feasible action to be taken by the management considering the cost (as well as if it’s lucrative in the long term) is through the collective bargaining agreement scheme.

Achieving and Sustaining Competitiveness in the Global Era: The Case of Company ABC (Part 2)

ANTO COMETA

Analyzing and Resolving the Issues

The major dilemma as outlined by the issues and probable concerns perceived to be encountered by the company is principally attached in the organization’s view of losing its competitive edge in the market. With the introduction of new technology, international standards in the management of risks using mathematical models, sophisticated regulatory and compliance requirements resulting from laws seeking to accommodate e-transactions among others pose a tight spot in the efficiency of the organization to adeptly address the concerns of the business and the workers.

Among the six identified issues and concerns, there are three that could be deemed crucial. These need extreme focus in order to facilitate the resolution of the problem and avoid adverse consequences that may arise from those. It doesn’t mean however, that the rest are of low significance. The remaining three from the identified critical issues and concerns are developmental consequences which are also central to the dilemma.

The first critical issue relates to the financial or banking institution’s business efficiency and productivity. If the organization considered increasing the bank’s efficiency to generate higher productivity while maintaining or lowering the overheads by applying labor flexibility it could be the case that instead of achieving what is desired the converse could occur this could be considered as the worst alternative instead of being the best option. We do not shelve that there are several benefits that could be attained by applying labor flexibilization measures. The advantages by implementing such measures in the company are exceedingly significant to the operations of the business. On the firm’s end it would provide savings or profit - operational or overhead costs for not hiring additional manpower, and better resource allocation. On the part of its workers, it facilitates in the acquisition of several skills primarily related or needed for business operations. Together with the benefits that could be acquired by applying such measures, there are also negative implications that affect not only the business and but also its workers. In line with applying labor flexibility, modifying the organizational structure, processes and design follows. This is to justify or legitimize the utilization of such measures applied in the organization specifically to its workers.

However, applying labor flexibilization measures as well as changes in the organizational structure processes and design without careful analysis, strategic implementation and compatibility with the laws governing the rights of the workers could lead to further costs than rewards. If this happens, increased worker woes on employment matter leads to job discontentment. In the case of most workers in relation with the commonly used labor flexibilization measures applied in companies correlates more distressing views which are human capital exploitation and unfair labor practices. As stated in Article 247 of the Philippine Labor Code, unfair labor practices are not only violations of the civil rights of both labor and management but are also criminal offenses against the State which shall be subject to prosecution and punishment as herein provided.

There were several case studies conducted for financial institutions showed that cost reduction is just one way of profit maximization. Banks that tried to maximize profits by raising revenues while reducing costs is quite effective, but there are also those who provide higher quality services that raised costs yet also raised revenue more than the cost increases. It could be perceived that the results suggested that methods that exclude revenues when assessing performance may be misleading (Berger and Mester, 2001). Organizations should run the business in the interest of meeting not just their own needs but also other important stakeholders such as the workers since they are also contributors which have impact on the performance of the business. The best alternative is to look for other methods or have a consultation as to what would be the measures that could increase efficiency and productivity without encountering such concerns.

The second is compensation appended with the worker’s benefits. Benefits more often than not are considered to be part of the entire wage or compensation arrangement given to the workers. Companies recognize the value of benefit packages in the organization as key factors in the individual’s consideration for an employment opportunity, employee morale and motivation as well as reduction in staff turn over. Thus, the benefits offered in the organization are quite essential to the overall employment picture.

The best way to understand the needs and at the same time agree or eliminate those which could not be granted is through the collective bargaining agreement. The needs identified have varying levels of significance and appeal to the worker, however, it doesn’t mean that these various needs are conflicting since these needs is dependent on the category (age and marital status) of the worker. If the organization decides to grant the need(s) one group over the other, it could likely cause tension and discord within the horizontal dimension. The best option for the management is really to negotiate with the union in order to arrive at a mutual agreement.

As for those demands made by individuals or group which yielded high levels of productivity and made significant contributions in terms of increasing the bank’s profitability one of the usual and conventional way of adjusting or modifying the base pay in order to reflect or make it appear higher than what is given is achieved by combining benefits and other incentives either monetary or non-monetary. The objectives of determining pay may have one or more that may be in discord with each other (De Siva, 1992). These objectives can be classified into four distinctive categories. First is equity which includes the narrowing of inequalities, wage increase of the lowest paid employees, the concept of equal pay for equal work value among others. The second is efficiency which is reflected in efforts to connect or associate part of the employee’s wage to the productivity or profit, performance whether group or individual as well as acquisition of both skills and knowledge related to the execution of job functions. The third perceived objective is related to the stability in the macro-economic aspect. This has something to do with the levels of employment as well as other related factors that of could either contribute or impede the balance and sustainability of development of the economy of a country. Last identified objective is the effective allocation of labor in the labor market. This particular objective relates to the mobility of workers whether geographical or industry related since the motive of doing such is to the idea of acquiring a net gain and not only to meet the individual’s basic requirements.

A lot of organizations are now in search of sustaining their competitiveness in the market by means of increasing the pay given to the employee. The type (s) of pay are mostly related to performance measures, this is primarily done in order to sop up the costs of labor of the organization at the same time motivate and recompense the employee for the performance. The conventional way of companies in order to secure increased wages and reward their employees is through job appraisal and promotion. However, due to the limitations on resources as well as achieving higher positions in the organization not to mention that current developments in the organizational structure becoming less hierarchical due to market demands and types of flexibility employed in the company, incorporating pay increases based on performance is perceived to be more attractive and effective rather than rewarding the worker through promotions this could be deemed as the best alternative option. One of the methods or strategies that is gaining acceptance throughout different industries particularly in the services sector in order to increase the productivity and profitability of the company at the same time rewarding the worker is through performance-based pay. Moreover, the trend in paying the employees is not for the output produced or even for the labor input rendered but simply for the time spent on the job (Blinder, 1990).

There are several theories in human motivation which incorporates pay or pay system as a driving force in motivating their workers to achieve, increase levels or maintain satisfactory performance. The systems of pay given to the workers are now being integrated as part of the human resource management of organizations. This is primarily done in order to achieve the business strategies and objectives whether financial or employee-related since both directly affect the operations of the business. Pay is viewed as a matching element or a dependent variable to the employee’s performance and productivity, by increasing or providing additional pay based on increased productivity and performance is an indication that the company could its financial profitability and could achieve its business objectives.

Its is noteworthy to take into consideration that in designing or structuring a performance pay system, the type of system should highly promote the kind of performance that the organization requires and not just to increase its revenue. Fundamental principles should be laid out and that the objectives and targets should be quite measurable or realizable. Furthermore, the achievement of the performance pay system should be supported by operative approaches and strategies so not to establish that the targets and objectives are impossible to attain. As necessary, employ consultation or increase the involvement in the decision making process or designing of the system. By employing such actions, it could generate efficient or effective ideas, approaches and strategies that could contribute or lead to the achievement of the goals. The organization should also have a feedback mechanism to review the processes, procedures, outcome among others of both pay system and the targets and objectives. It is a excellent avenue in determining and assessing the key factors of either success or failure.

Lastly, skills and competencies which encompass the general productivity of the organization in delivering the required output needed for the business. In order to address the issues concerning the skills and competencies of its workers, organizations should also provide trainings since these are quite beneficial to the company and its workers in achieving their goals both monetary and non-monetary, this could be perceived as the best alternative over a negotiated agreement. To reinforce the training programs, the company should employ Total Quality Management (TQM). TQM which consists of continuous improvement activities involving everyone in the organization, managers and workers alike in a totally integrated effort toward improving performance at every level ( Goetsch and Davis, 1997). It could be integrated as part of the organizational and professional development program. In a quality organization everyone is constantly learning. Management encourages employees to constantly elevate their level of technical skills and professional expertise. People gain an even greater mastery of their jobs and learn to broaden their capability (Scholtes as cited by Goetsch and Davis, 1997). The required set of skills and competencies are basic not only because these are elements essential to the execution of the assigned functions and tasks of the worker in order to achieve the desired output needed for the operations but also important for innovation and alignment of current and future goals and strategies of the organization.


References

Blinder, A. 1990, Paying for Productivity, The Brookings Institution, Washington

Berger, A. and Mester, L. 2001, Explaining the Dramatic Changes in Performance of U.S. Banks: Technological Change, Deregulation and Dynamic Changes in Competition (Working Paper), The Wharton School, University of Pennsylvania

De Silva, S. 1998, An Introduction to Performance and Skill-based Pay Systems, International Labor Office, Geneva

Goetsch, D. and Davis, S. 1997, Introduction to Total Quality – Quality Management for Production, Processing and Services, Second Edition, Prentice Hall, Ohio

The Philippine Labor Code, Department of Labor and Employment, http://www.dole.gov.ph


Thursday, May 1, 2008

Not Another Ordinary Day...

ANTO COMETA

A statement we drafted (together with the Chair and Vice-chair) disseminated to all constituents of the college and forwarded to a major newspaper in the observance of Labor Day. Mabuhay ang uring manggagawa!


NOT ANOTHER ORDINARY DAY…


The SOLAIR Student Council joins the rest of the nation in the observance of Labor Day.

The salient labor concerns such as sluggish implementation of wage increases, debilitating work standards and conditions, among others have remained unresolved up to this time. And this year may not be significant, as workers are still at the brink of rising unemployment rates, poorer working conditions, higher prices of commodities and increasing contractualization of work.

The recent shortcomings of our agricultural prices strained many of our laborers to clamor for the expedient implementation of a rational wage increase to sustain their decent livelihood. We believe that the increase on the daily wages is not only timely as it has been long overdue. The Student Council sees this issue as an institutional dysfunction of the appropriate government agencies supposed to deliver the mandate for the conduct of wage reviews, whether in a state of unprecedented national crisis or not.

We call for the immediate resolution of this issue and we urge these agencies to immediately act and present a feasible wage increase structure. We clamor for a more transparent and consultative wage review process to include participation of the different sectors of the society, especially the working population. By exercising this mandate, we provide assurance for both workers and employers.

The UP SOLAIR Student Council believes that the appropriated non-wage benefits for this year’s observance of Labor Day is an insult to the ordinary workers. These token “gifts” are clear manifestations of the State’s lopsided policy towards Labor. These represent the State’s total disregard of the interests and overall well-being of the working class.

We demand for the relevant government agencies to deliver their mandate! We demand for transparent and accountable wage review process to include different sectors of the society, especially the working class! We demand for the expedient implementation of wage increase!

We call on the Arroyo Administration to act on these NOW!!!


UP School of Labor and Industrial Relations
Student Council AY 2008-2009

May 01, 2008