Internal and External Factors of Labour Market - Essay Example

Internal and External Factors of Labour Market Question 1 Problem Statement Blitzen Engineering is a supplier of automotive components to prestige car manufacturers. The company is located in United Kingdom. Median age of their engineers was 53 while 80% of workers are in the age group of 50 to 60. It can be understood from above mentioned statistics that within next five to ten years major portion of engineering staff will retire. This means the company needs to recruit at least sixteen new engineering graduates within next few years in order to continue operation. Research report prepared by AC Nielsen suggests that Europe along with United Kingdom will face shortage of human capital in upcoming future (DeLong, 2004, pp. 12-25). Labour market of Europe is suffering for aging workforce issues. Study suggests that there will be 4% hike in aging population within next eight years (Krenn and Oehlke, 2001). Companies are aware of the fact but they do not have much choice left due to following reasons: The world is going through one of the most turbulent financial period in the history of mankind. Companies are struggling due sluggish growth rate and low return on investment. They are not ready to invest money on recruiting new staff and designing training & development. Companies like P&G use “Build from within” strategy in order to give new job responsibility to existing employees without hiring external candidates. Many companies use “Build from within” strategy in order to reduce cost of developing untrained and fresh human resource pool. In 1993, Polachek and Siebert proposed Human Capital theory in order to address aging population issue (Polachek and Siebert, 1993, pp. 23-67). They have pointed out that life can be segregated into two phases. In the first phase young people develop human capital in terms of skill, knowledge and education while in the second phase they earn employment on the basis of developed human capital. The study suggests that substandard aging population has less human capital in comparison to talented young human resource. Human capital decreases due to aging. Labour market is heterogeneous because employers can never forecast accurately future productivity of particular employee. Employers are cognizant about lack of productivity of aging population but they are not ready to take any corrective actions to sort out the problem (Remery, Henkens, Schippers, and Ekamper, 2003). The company should focus on following factors in order to internal and external issues of aging workforce. Resistance to Change Study shows that aging workforce show low enthusiasm to adopt new technologies and sometimes they show resistance to change management process (Elzinga, Gulledge, and Lee, 1999, p. 88). This situation can create negative impact on organizational culture. Organizations having horizontal structure show higher propensity of change resistance in comparison to companies with vertical structure (Daft and Willmott, 2010, pp. 108-109). Study conducted by various research scholars (such as Remery and Henkens) shows that younger workforce do not associate with aging population in the field of showing resistance to adopt new technologies. Expertise In many cases it has been observed that aging population provide benefit to the organization. Employers believe that aging workforce can deliver better expertise and technical knowhow in comparison to young workforce. Work experience of aging workforce is built up over long time frame and it has strong influence on dimension of overall productivity (OECD, 2012, p. 200). The above mentioned fact is true for organizations having small number of aging workforce while same cannot be said for Blitzen Engineering (read 80% of employee belong to aging workforce) (Warmuth, 2008, pp. 5-12). Increase in density of aging population decreases the speed of daily operation for an organization. Costs Correlation analysis shows that aging work force contributes higher level of absenteeism and higher labour costs. Employers maintaining an aging workforce complemented with average education level tend to incur high opportunity cost in contrasts employers maintaining a young workforce complemented by average level of education (Mankiw, 2011, p. 55). Seniority based Wage system increases cost of employer while inactivity such as absenteeism also contribute significant amount of cost to employer (Kamakura, 2003, p. 37). Organizational Adjustments Study shows that aging workforce decreases the scope of employee empowerment and flexible working environment. Aging workforce needs organizational adjustment hence it organizations needs to spend its valuable resources to adjust senior employees (Mueller, Wanberg and Connie, 2003). Study also suggests that relatively young workforce complemented by high level of education do not associate themselves with aging workforce on the ground of ergonomic organizational adjustment (Leibold and Voelpel, 2007, p. 185). Question 2 Nick Wilton has described external labour market as available stock or external supply of labour. The research scholar has also argued that higher education system in United Kingdom has changed drastically in last 25 years (Wilton, 2011, pp. 96-117). Blitzen Engineering can use following alternative channel of external labour market supply. In 2007, Seip has pointed out that companies can recruit talented engineers through intra company transfer. Blitzen engineering needs to recruit engineering graduates within the age group of 28 to 30 with minimum five years experience in order to ensure retention of work quality. They do not need to spend huge amount money on induction training for experienced graduates hence the organization can save significant amount of cost regarding training & development. The company can contact hire personnel with the help of institutions such as EURES or European Employment Services. Recruiting OECD and non OECD migrants can also be a potential way to sort out the problem (Dumont and Lemaître, 2005). They can use secondary data source as a potential way to decrease brouhaha over supply of external labour force (Bruland and Rusten, 2009). Many companies use RPO or Recruitment Process Outsourcing in order to solve issues related to contingent human resource management (Çiçek and Özer, 2011). RPO or Recruitment Process Outsourcing focuses on locating talented human resource capital and managing their payroll. In RPO process organizations pass the responsibility of recruiting staff to external contractors in order to simplify recruitment process. This process can help organizations to save cost regarding sourcing talent and organizing recruitment event. The company can recruit Asian students by establishing strategic tie-ups with their universities. Countries like India, China are enriched talented engineers hence establishing strategic tie-ups with Indian Universities (IIT, NIT) will open up a source of talented human resource pool. Outsourcing Asian human resource pool can save cost regarding pay roll up to 40%. External Labour Market Strategy QWL Factors Measures Remuneration Blitzen Engineering needs to provide competitive pay, perks and benefits to not only aging population but to young engineers also. Learning Opportunity The company needs to develop a learning platform for young graduates in order to motivate them to perform well (Traylor, Heer and Fiez, 2003). Job Security Contractual arrangement in terms of temporary and permanent employment is needed to be designed for young engineers. Utilization of Skill Level of challenge should be designed in accordance to talent of employees. Fair Treatment Top level management of the company needs to show equal treatment to both senior and junior engineers in order to maintain a healthy organizational culture (Williams, 1984). Employee Voice Top level management of Blitzen Engineering needs to engage young engineers in critical decision making in order to boost confidence among them (Courtney, 2001). Talent Management Strategy The company should implement a systematic talent management strategy in order to sort problem related to external labour market. Confirming objective of talent management program Selecting potential candidate Targeting strategy Creation of alternate solution Building responsibility and accountability Employee empowerment Blitzen Engineering needs to clarify the objective of their external labour market strategy. They need to establish synchronization between external labour management strategy and talent management program. The company can use business unit based nomination of potential candidates in order to avoid future problems. Young talent should be hired on the basis of talent pool based assessment. Blitzen Engineering should target British polytechnic schools to hire talented human resource pool in order to decrease overall cost associated with recruitment strategy. They need to apply concept of Knowledge sharing in order to pass expertise of senior engineers to new recruits. Blitzen Engineering can apply Theory Z to fillip the potentiality of knowledge sharing program. The company needs to put extra responsibility on the shoulder of senior engineers to nourish the talent of new recruits. Senior engineers need to take more responsibility and accountability in order to build future talent for the company. Blitzen Engineering needs to give more powers to internal staffs. Employee empowerment can help them to take right decision for betterment of the company. Employing lattice structure in management can resolve the issue related to stringent labour market can sort out problem for the company. Lattice structure of the company can also increase scope for hiring talented human resource pool from highly competitive external labour market. Reference Barbieri, E. and Fitzgibbon, W., 2008. Transformational Paradigm for Engineering and Engineering Technology Education. [pdf] Available at: [Accessed 20 November 2012]. Bruland, S. K. and Rusten, G., 2009. 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Free Movement of Workers and Labour Market Adjustment Recent Experiences from OECD Countries and the European Union: Recent Experiences from OECD Countries and the European Union. Paris: OECD Publishing. Polachek, S.W. and Siebert, W.S., 1993. The Economics of Earnings. Cambridge, MA: Cambridge University Press. Remery, C., Henkens, K., Schippers, J. and Ekamper, P., 2003. Managing an Aging Workforce and a Tight Labor Market: Views Held by Dutch Employers. [pdf] Available at: [Accessed 19 November 2012]. Traylor, R. L., Heer, D. and Fiez, T. S., 2003. Using an Integrated Platform for Learning to Reinvent Engineering Education. [pdf] Available at: [Accessed 20 November 2012]. Warmuth, M., 2008. Managing the Aging Workforce. Munich: GRIN Verlag. Williams, W. W., 1984. Equality's Riddle: Pregnancy and the Equal Treatment/Special Treatment Debate. [pdf] Available at: [Accessed 20 November 2012]. Wilton, N., 2011. An Introduction to Human Resource Management. 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