2005 Fiscal Year Final Research Report Summary
Analysis of Compensation Structures and the Transformation of the Japanese Firm Using the Matched Personnel and Employee Survey Data
| Project/Area Number |
15530119
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
Economic theory
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| Research Institution | Hitotsubashi University |
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Principal Investigator |
TSURU Tsuyoshi Hitotsubashi University, Institute of Economic Research, Professor, 経済研究所, 教授 (00155441)
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| Project Period (FY) |
2003 – 2005
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| Keywords | personnel data / HR system reform / pay for performance / work effort / employment adjustments using buyout formulas / adverse selection |
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| Research Abstract |
This research examines the outcomes of the performance-based HR system reform and employment adjustments in a Japanese manufacturing company, using the personnel data and the employee survey results. The analysis reveals two main findings.
First, the HR system reform has generated mixed effects on the work effort of employees. The skill grade system had gradually produced seniority-oriented bias, such as automatic upgrading and the pileup of non-managerial employees at the top tier of non-managerial ranks. The company introduced the job grade system in 2000 to cope with those problems. In the transition from the skill grade to the job grade system, the company systematically re-graded people. Using the survey results matched with the personnel data, the impact of the re-grading on the work effort was estimated. The results show that although up-graded managers improved their work effort, the rest of employees experienced the decline of work effort.
Second, employment adjustment using a buyout framework invites "adverse selection." Performance ratings for employees who accepted buyouts in 1993 and 1996 are compared with those of employees who remained or left voluntarily. For the 1993 buyout, while the skill grade level of buyout takers are relatively high, their performance ratings are the same as those of incumbents and lower than those of voluntary leavers. Therefore, the buyout takers were those whom the company wanted to dismiss. For the 1996 buyout, although performance ratings of buyout takers were the same as those of incumbents in the case of managers, the ratings of non-managerial, lower ranked buyout takers were higher than those of incumbents and the same as those of voluntary leavers. Therefore, the non-managerial buyout takers were those whom the company would have preferred to retain. The company was unable to specify who took buyouts despite efforts to ensure retention of valued employees.
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