Human Resource Economics in Unilever Company - Case Study Example

Human Resource Economics Table of Content Introduction to Unilever---------------------------------------------------------------------------------- 3 Human Resource Management at Unilever -------------------------------------------------- 3 Research on the topic -------------------------------------------------------------------------------------5 Signaling Approach ------------------------------------------------------------------------------6 Conclusion --------------------------------------------------------------------------------------------------8 Recommendations -----------------------------------------------------------------------------------------9 Bibliography ----------------------------------------------------------------------------------------------11 Introduction to Unilever Unilever is a renowned name and one of the most successful consumer good companies in the world. Statistics indicate that about 150 million times someone somewhere around the world has chosen Unilever’s products. Unilever operates in more than 150 countries across the world. The mission of this firm is to add vivacity of life. They are known for meeting the daily personal care, nutrition and hygiene needs of the consumers with their brands that help people to look good, feel good and get more out of their lives. The roots of Unilever deepen in the local cultural market with every passing day, as they succeed in building stronger relationship with the people which serves as the foundation for their future growth. Unilever product portfolio contains 18 percent of homecare products, 28 percent personal goods, 19 percent beverages and ice-cream and 35 percent dressing, spreads and savory. Unilever considers its employees the heart of their business. Therefore it believes in developing, rewarding and harnessing their skills. Unilever is considered to be the world’s most culturally diverse firm, with its leadership belonging from 21 nations. 30 percent of the managers working at Unilever are women. It believes that in order to succeed in such a competitive industry it needs to maintain the highest standards of corporate behavior between the employees, while also addressing the customers’ needs1. Human Resource Management at Unilever The leadership of Unilever believes that their centralized decision making is one of the fundamental factors that have contributed to the success of the firm. Unilever focuses on increasing the connection of the employees with the firm as they think that a loyal employee contributes more than any other resource of the organization. The management of the firm is making progress in transforming the structure and the way of working within the firm. This may involve difficult decisions that the firm has to make. However, these decisions are considered to be effective for the long-term health of the firm. Unilever has recently launched a transformation process, so that they can get the most out of the resources employed. This transformation process however focuses on the three major areas. These areas are: Simplifying the structure of the organization to eliminating the extra cost for which the customers have to pay. Developing the skills and abilities of the employees. Aligning the behavior and culture with the operations of the firm which is considered to be a more appropriate way of running business in the global market. There are two major criteria on which the performance of the employees is evaluated by the firm. These are performance and sustainability. The growth and the ambition of the firm demand that the organization should have a flexible structure and culture. This in the long run will help the firm to attract and maintain the best talent and leaders. Unilever believes that the engaged organization is considered to be an effective organization. The firm considers its employees the passionate advocates of their products and brands. The HR managers help the firm in attracting, developing and retaining the right talent for the firm. Research on the topic Signaling is considered to be the notion when one party that is termed as an agent credibly gives information about itself to the other party that is called the principle. For example in the Job signaling model of Michael Spence an employee usually sends a signal about the level of his ability to the employer, by the help of his education credentials. In contrary to this the human capital theory states that an individual who invests in his education or tries to increase his knowledge by any means automatically increases his productivity as well. In the signaling theory this approach is not considered to be true2. According to the signaling model the education that has been acquired by the candidate only serves as a signal to the employer that this person is competent and therefore has high productivity as well. However this may not always be the case. There are times when a particularly skilled individual is not able to afford a top university. If the initial productivity of the employees is appraised by the firm based on their school ranks, then the individual may end up at a firm providing less career opportunities than at firms where the individual would have started if he had good grades. Even if the employers realize it soon that the individual has high productivity, the chances of him catching up with the full productivity potential is not that high3. Organizations usually think that the signaling model is not at all effective, which is not true on the first place. Organizations usually face this challenge of choosing only one candidate out of the pool of hundreds of candidates, all with different levels of skills and abilities. It can be a costly and time consuming process to evaluate every other job applicant and give them some time to show their skills and competences. It is here where the signaling model usually comes into play. In simpler words, signaling model usually helps employers and firms to quickly and effectively distinguish candidates with different skill levels and potential. But there are chances that a firm may make a mistake in underestimating or overestimating the talent of a person. According to the job matching survey resented by NFIB (National Federation of Independent business), one of the five workers turn out to be about 20-25 percent less productive than estimated by the employer. Therefore, in most cases signaling model provides the desired result to the employer (Armbrüster 2006)4. Signaling Approach Signaling approach takes into account the idea that the insider has information that is not yet available in the market. The moves that the insider makes may signal information to the outsider which results in the change in stock prices. The idea of signaling was proposed by Michael Spence. He proposed that in a situation where the information is asymmetry the individual may signal their type, which means that transferring of information from one party to another may help in the resolution of asymmetry. The idea of signaling can be studied in the context of looking for job. The firm may only be interested in hiring new employees that signal the firm that they are skilled at learning. There is no doubt about the fact that all the job candidates will claim that they are skilled at learning but only a bunch of them will actually be. This is what we refer to as information asymmetry. According to Spence, going to college or university may function as a signal that the individual possess the ability to learn. Employers usually assume that the individual who is skilled at learning will be able to finish his/her college/university more easily than the unskilled individual. This however can be considered as a signal for the employers. If the individual did not learn anything from the school, the school can still be considered as a signal. This is because the actions taken by the individual i.e. going to school suggests that at least they possessed certain capacity of learning5. There are different signaling approaches. One of the signaling approach that serves as the potential trap is discriminating the employees on the basis of their gender. There is no doubt about the fact that from the very beginning men have being doing the physical hardworking job that women are not capable of doing in the first place. However today is the era of technological progress; not many of the jobs require physical human strength because of most of the machinery and processes are fully automated nowadays. In a world like today this is still considered to be a critical question that why men are able to acquire job that require high skills and competence. Why are women not investing in their education to compete with the men6? This however is considered to be a loop effect, as many firms prefer to hire men and offer them higher wages than women, despite of the fact that both of them have same educational skills and educational signaling. This seems to be the inertia effect that is the effect of the past, where men were considered to be more reliable, productive and stable. This is the reason why not many women invest in their education as they think they will not be able to recover the cost in the long run (Pierre Cahuc 2004)7. Self-selection There is no doubt about the fact that the best recruitment decisions are the one where the candidates are given the negative aspects of the vacancy and the good points are mentioned as well. The employer must make sure that all the necessary details about the vacant position is made available for the candidate as it will help them in self-evaluation that whether or not they are fit for the position. Prohibitory Method The prohibition methods are related to the newly appointed employees, whose terms and conditions of the employment state are projected to the probationary period. Tournament Model The tournament model defines situations where the difference in the wages of the employees is not actually based on the marginal productivity but instead on the relative difference between the skills of the individuals. Conclusion The report suggests that the signaling framework seems to be much more interesting from the outlook of human resource than the rival theory. This is because the signaling framework may provide Unilever a deeper insight in exchange of the information occurring between the economic agents. The new insight provided by the signaling framework will help the Unilever to analyze the screening process and also its critical points. Signaling may work as an effective tool for the human resource manager of the firm, especially in the case where there is a broad base of signals as well as indices on which the manager determines the final decision. The post-employment decision is considered to be of great importance for the human resource of Unilever, as it keeps the information about the signals and indices updated. It also assists the human resource manager at Unilever to build a data set parallel and connected to the database of indices and signals. This database is considered to be the dataset of motivational procedures that are used for various combinations of indices and signals. From the practical application of job signaling in the human resource department of Unilever, one can observe that it can be of great importance to the human resource manager as the collected data regarding the employees can be utilized more effectively by increased precision of indices and signaling detection. In the recent years the demand of the labor market has risen demanding more productive employees. This phenomenon however is the evidence itself by a greater wage differential and according to the increasing demand of the signals, which signifies a high productivity worker. Signals are informational in nature like a degree and this is the reason they are considered lemon, as they also differ in quality. Different degrees may present different signaling costs, which indicate that they will be signaling different stages of productivity. Further screening cannot be conducted by simply checking the degree, as there are chances that the signaling cost may differ greatly (Connelly 2011)8. At times the human resource managers at Unilever manage to pick the perfect curriculum vitae but fail to pick the right character or motivation or even the right productivity of the applicant. The seller or simply the latter has an informational advantage over the buyer i.e. the human resource manager. The effective and modern screening process helps in selecting the most competent person for the position and for which the HR managers do not just need to rely on the screening process but also on the indices and the adaptable signals. Unilever gives a detailed job description of the vacant position so that the candidates who are applying for eth job get a detailed insight about it. Similarly the tournament model is used by Unilever to select the salary package for the employees at different designations. The salary package of different position may differ from one another this is because the skills of all the employees working at Unilever vary. Recommendations There are a number of challenges faced by the human resource department of Unilever in screening, monitoring, training and recruiting candidates. Amongst the responsibilities of the human resource managers is to hire the most prepared and fit individual for the organization and must also be able to effectively design a training program, which will assist in using the productivity of the employees. The human resource managers at Unilever must also make sure that the new employees as well as the team maintain the most effective productive pace. For the purpose of succeeding in the human resource practice, the organization must conduct structured pre-employment screening as well as thorough post-employment HRM practices that will most likely boost the level of employer’s learning about the employees’ productivity. It is certain that the human resource managers at Unilever need to adapt new and operative view of information for increasing the effectiveness of their functions. One of the duties of the HR manager is to screen the new employees for the organization. The fundamental element for the screening process is considered to be a signal that may differentiate the more productive worker from the less productive worker. After conducting the screening process the HR manager need to implement strategies that will help the new employees to get in the position of leadership and boost their level of productivity. It also helps the employers to understand the level of productivity of the employees by simply observing the on the job performance of the employees. The latter strategy is considered to be significant for according to the theory name “the speed of employer’s learning”, as it initially reduces the expectation errors by almost 50 percent and also reduces the value of educational signaling. After the initial, it is the responsibility of the firm to keep the employees motivated by assigning them different important roles and responsibilities in the organization by performing job enrichment and enlargement. The discussed steps will increase the possibility of employees being adapt and fit for the job. These steps are essential for Unilever as it increase the possibility that the employees will remain with the firm. Unilever must invest on the training of the new employees, as it will benefit both the company as well as the employees. Bibliography Armbrüster, Thomas. "Gaining talent and signaling quality: human resource management." The Economics and Sociology of Management Consulting, 2006: 178-202. Connelly, Brian L. "Signaling Theory: A Review and Assessment." Journal of Management, 2011: 39-67. Edward, J, Srinivasan, and Suraj. "Signaling Firm Performance Through Financial Statement Presentation: An Analysis Using Special Items." Contemporary Accounting Research, Forthcoming, 2009. Introduction to Unilever. 2013. http://www.unilever.pk/aboutus/introductiontounilever/ (accessed July 16, 2014). Lange, Fabian. "The Speed of Employer Learning." Journal of Labor Economics, 2007: 112-135. Pierre Cahuc, ‎André Zylberberg. Labor Economics . 2004. Spence, Michael. "Job Market Signaling." The Quarterly Journal of Economics, 2000: 355-379. The Importance of Signalling in Job Placement and by Andrew Heisz and Philip Oreopoulos:Family and Labour Studies Statistics Canada. 2006. http://www.nfib.com/ (accessed July 17, 2014). Read More