Tuesday, October 27, 2015

To Tip or Not to Tip, That is the (HR Policy) Question

I often think that us Americans know how to take a good thing and push it too far (e.g., youth sports, St Patrick’s Day, the size of burritos). Maybe tipping is next? Just as tipping seems to be expanding, a leading New York City restauranteur has announced an end to tipping in his restaurants. Why? With larger tips being given to servers and front-of-the-house workers but not shared with cooks, dishwashers, and other back-of-the-house workers, income differentials have widened. Ending tipping and raising menu prices is seen as a way to raise the pay of the back-of-the-house workers.

From an academic perspective, this could be seen as a contest of economic versus psychological approaches to human resources (HR). A system of tipping is consistent with an economics mindset—that is, the prospect of receiving a larger tip is believed to provide an incentive for providing better service to the customer. This is because economics assumes that workers are motivated by money, and need money to be motivated. As with many incentives, there can be additional effects. Some servers might expect that certain customers will be stingy tippers (like economists at a conference!), and provide weaker service from the start. And the prospect of tips provides an incentive for servers to turn over tables, which can also be good for the business but not necessarily for the diners. And if tipping prevents higher wages for back-of-the-house staff, then this makes those jobs less attractive, which can be a challenge for restaurants (to be frank, it’s not clear to me why tipping prevents raising back-of-the-house pay, but that’s the story the restaurant industry seems to believe, or wants us to believe).

Economic theory predicts that replacing tips with a higher charge that can be distributed to all employees will weaken these incentives and reduce customer service. From a different perspective, however, this shift is seen as creating greater levels of workplace fairness. Consistent with simple psychological theorizing (which is also taking hold in behavioral economics), greater levels of fairness should promote cooperation among employees. A manager at a Twin Cities restaurant with a no-tipping policy was quoted in the paper as saying “Without that giant pay disparity, the front-of-the-house/back-of-the-house dynamic is definitely different here” (StarTribune, October 22, 2015) And if employees are motivated intrinsically and value fairness, then customer service shouldn’t suffer. Tipped workers also bear the psychological burden of variability and unpredictability (e.g., some shifts are slower, and thus tips lower, than others) so eliminating tips can have other benefits for workers which can, in turn, benefit customers.

As an aside, traditional economic theory also suggests that pooling tips to share and replacing tips with higher menu prices distributed to all workers are essentially the same, and incentives will be weakened in either case. But psychological and behavioral economics thinking suggests that these are not the same if there is a psychological process involved with a server earning the tip and then being forced to share it. So there are many layers to this issue.

So what will happen in practice? Time will tell, and the responses and outcomes will probably vary—after all, workers are heterogeneous and bring different values, goals, and outlooks to their work. But I think this is a good example of the issues that HR professionals need to wrestle with, and it illustrates how critically important it is for HR professionals to have a deep understanding of the complex drivers of human behavior. It should also serve (no pun intended) as a reminder that managing people is not just about leadership (which is all the rage these days), but is also about wise policy design and implementation. Bon app├ętit!  

Thursday, September 17, 2015

Brief Reflections on Work in Cape Town, South Africa

I recently returned from Cape Town, South Africa, where I had the pleasure of attending the World Congress of the International Labor and Employment Relations Association. The conference was very stimulating, and it’s always good for the ego to have scholars from all over the world wanting to talk to me about my research--past, present, and future. But it was also fascinating to get out of the conference hotel and experience Cape Town.

The shameful apartheid era has left a sad legacy of tremendous inequality and poverty. The District Six Museum memorializes the destruction wrought on that Cape Town neighborhood by the forced removal and resettlement of the ethnically-diverse residents. Visiting this museum was a moving experience, and the tremendous emotional costs were readily apparent. But not only were family and social relations destroyed, so, too, were economic relations as a vibrant community was displaced and workers uprooted from their livelihoods and segregated into townships far from the city center.

Lack of economic opportunity and work continues to be a serious problem—maybe the most important problem of all. Individuals struggle to get by in whatever ways they can; these pictures of workers rounding up passengers for unmetered taxis or selling fish from the back of a truck capturing just two examples:

I was also able to visit two micro-job creation initiatives: Monkeybiz and Streetwires. Monkeybiz gives Township women (and men) beads and other craft supplies that they turn into fantastic beadwork dolls and animals and sell to Monkeybiz on market day, which are then sold by Monkeybiz to people like you and me:

This allows these women and men to earn a basic income without having to leave their family responsibilities. Streetwires is a similar venture, though the workers artists are directly employed. This young woman created the first zebra head for Streetwires:

It was very uplifting to see these ventures in action. And even though income is tremendously important for these individuals, we know that work is more than just about income. You can immediately see the creativity and personality embodied in the workers’ creations, and can easily envision the dignity that these opportunities create. More efforts to provide jobs in these communities are sorely needed. 


Thursday, August 13, 2015

Book Review: The Development of Human Resource Management Across Nations

My friend Bruce Kaufman has produced yet another stimulating and important book. It is easy to think that good human resource management (HRM) practices are universal. Shouldn’t all workers be carefully selected into jobs that are a good fit, provided with feedback and opportunities for development, treated with respect, and rewarded for performance? But too much emphasis on universal best practices can lead to an ethnocentric mindset in which the historical, cultural, and institution-specific aspects of HRM are under-valued and overlooked, if not dismissed and rejected. Indeed, unlike many volumes of labor history and a variety of books comparing industrial relations systems across countries, very little has been written about the history of HRM and its comparative patterns. Into this void steps Kaufman with an ambitious effort to bring together experts to trace the development of HRM up to the present in 17 diverse countries.

The Development of Human Resource Management Across Nations: Unity and Diversity (Bruce E. Kaufman, ed., Edward Elgar Publishing, 2014) follows a one-country-per-chapter structure along with a comprehensive introduction by Kaufman that sets an appetizing table by presenting the multiple contribution of this unique edited volume. I strongly applaud the diverse set of countries included. The roster goes beyond the usual Anglo and European suspects to also include Argentina, Brazil, China, India, Israel, Japan, Korea, Russia, South Africa, and Turkey. Moreover, Kaufman intentionally relied on natives of each country to lessen American ethnocentric perspectives and ensure access to materials written in original languages. The result is impressive, including some chapters that represent the first time that a country’s development of HRM has been published, not only in English but in any language.

Some of the details are fascinating. You don’t want to miss influential incidents or phenomena like the Revolta das Panelas, the human capital stock system, “Pali! Pali!,” the Marcia dei quarantamilia, or the Stakhanov movement. More substantively, you shouldn’t miss the commonalities (all organizations manage people in one way or another), but even more so, the unique political, cultural, and historical factors involved in the evolution of HRM across this stimulating group of countries. In none of these countries is HRM a new phenomenon—again, all organizations manage people in one way or another—and nowhere is HRM immune to larger trends like globalization, world wars, and technological change. And I particularly appreciate the extent to which the chapters show that the development of HRM everywhere is inextricably linked to industrial relations and labor movements; HRM is not something distinct and unrelated.

But unique trajectories within the countries really force one to stop and think about the influences on HRM. And while all of this is undoubtedly interesting for those who like history, the importance goes much deeper because all of today’s HRM system are a product of their own development. The successes, failures, and constraints revealed by each historical record has a lot to tell us about today’s strategies, and tomorrow’s possibilities and challenges. This should be very stimulating for researchers and professionals alike. And on a narrower basis, for scholars interested in comparative research or professionals facing assignments in a specific country, this volume can also be tremendously beneficial by providing the institutional background for deeper excursions and successful ventures relating to specific countries.

Kaufman’s introductory chapter to the volume sets the stage for a theme of convergence v. divergence that runs throughout the country-specific chapters. This is important. What’s not made as clear is that the country experiences also all reflect the changing influence of different frames of reference on the employment relationship which translates into different preferred approaches for managing human resources. Neoliberalism, pluralism, unitarism, and in some countries, even Marxist revolutionary thought, all dominate at different times and yield specific HRM patterns and practices. Moreover, a related-yet-unstated theme is that the evolution of different HRM patterns and practices can be understood as the struggle of employment relationship actors to achieve the key objectives of the employment relationship—especially efficiency, equity, and voice—against a backdrop of a particular set of cultural, historical, institutional, political, and competitive factors that prioritize certain objectives while also pointing toward specific strategies for their achievement. In other words, not only do all organizations throughout time have to manage employees one way or another, but they do so, implicitly or explicitly, with certain goals and assumptions in mind and in the face of various constraints. I've written about this in various blog posts (one example, another example), and this volume provides a fascinating breadth of contexts in which we can see these challenges evolve.

In closing, this is an important and interesting book that should be of value to HRM professionals and researchers from diverse fields. The motivation for the volume is compelling, and the execution is well-done. Today’s debates over best practices, strategic HRM, and the determinants of HR practices have finally been given their historical foundations in a diverse set of countries, and scholars and managers should embrace this opportunity to understand the evolution of HRM practices and the implications for today’s research and practice. I would like to see two things, however. First, the publisher should price the book lower to make the volume more accessible, especially to students and to readers worldwide. Two, it would be fascinating to see a second volume that further diversifies the coverage of this volume, especially into Southeast Asia, Eastern Europe, Central America, and Africa beyond South Africa. But this isn’t meant to take anything away from what Kaufman and his team of authors have produced. I highly recommend The Development of Human Resource Management Across Nations as you will be stimulated by the unity and diversity of the development of HRM—broadly defined to include employment relations and public policy—from many corners of the globe.