Company B is considering two human resource practices: Option 1: High Commitment
ID: 1115038 • Letter: C
Question
Company B is considering two human resource practices: Option 1: High Commitment Strategy: After completing a probationary period, workers will be guaranteed life employment, with salaries determined by job title and seniority. Option 2: Job Performance Strategy: Promotion and compensation decisions will be based on measurable job performance-low performers would be laid off, high performers would recieve bonuses.
Assumptions: 1. Worker ability varies according to high and low ability, and workers know which type they are. 2. At time of interview, every worker says they are high ability, employer's do not know which ability the worker has. 3. On the job, workers choose a high or low level of effort. 4. Employers can't observe effort per se, but can view workers production. 5. Worker's production reflects combined variables of ability, effort, and luck. 6. High production workers will include high ability and strong effort types, but also those that got lucky. Low production workers will mostly include low effort, low ability workers, but also high production, high effort workers who were unlucky.
a. Considering the assumptions above and using asymmetric concepts, under which HR strategy would worker output be greater?
b. Considering both worker preferences such as risk tolerance and the function that relates measured output to ability, effort, and luck, under what circumstances would a high ability worker prefer the high commitment policy rather than the more incentive-based approach?
Explanation / Answer
Answer a : As per workers output considered the Option 2 HR strategy has been adopted by the management because :
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Answer b : Option 1 HR strategy is more commitment policy in the long run scanerio because sometimes higher performance workers not increase there productivity . The reason might be there luck so it is unfair to make prediction about employee only with there performance. If organisation take performance as a main criteria than in the long run higher performance who do not perform well can quitting the job as they considered doing job here is no more profitable.
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