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Market Competition and the Organizational Demand for Skills Empirical evidence from Swiss Industrial and Service Enterprises July 2001 PART I / PART II5.1 Prevalent patterns and antecedents of price and quality competition among Swiss firms 5.1.1 Combination patterns and interrelationships between price and quality competition: substitution, complementarity or mutual independence? Given the highly divergent adaptation and coping
strategies related to price and quality competition, it might be expected that
firms are hardly able to persist in environments were both of them are on a very
high level, and that for reasons of organizational consistency, they are eager
to look out for niches where one of the two challenges is insignificant or absent. On the other hand, it is evident that many
recent developments in the world economy have the effect that more and more
firms have to become (or remain) highly competitive simultaneously on both
dimensions. For example, many export-oriented industrial firms face the
challenge of having to offer highest quality goods and to compete harshly with
low-price competitors (e. g. from emerging countries) at the same time, and
current reorganization models (focusing on “lean production” or “total quality
management”) are designed to ease incompatibilities between enhancing product
quality and diminishing costs. Table 5.1: Percentages of firms with
different combinations of price and quality competition: firms in the industrial
Sector (N=459).
Table 5.2: Percentages of firms with
different combinations of price and quality competition: firms in the Service
Sector (N=308).
5.1.2 Firm size and firm age as concomitants of competitive intensity Given that intensive price competition is mainly
found in mature branches and under consolidated market conditions, it could be
expected that highest levels are reached by well established older and larger
firms: businesses dedicated to the traditional paradigm of Fordist mass
production. On the other hand, maximum quality competition should be prevalent
among
recently founded firms, particularly smaller enterprises still in their stages
of initial growth. Table 5.3: Degree of Competition*:
comparing firms of different size and age.
* Average values on a scale from 1 (very low competition) to 5 (maximum competition). With the exception of the youngest firm cohort, the intensity of price competition increases significantly with firm size within all categories of age (table 5.3). Thus, it is evidently not true that larger Swiss firms enjoy more competitive protections (e. g, related to their highly consolidated market reputation, their monopoly power or their higher degrees of institutional embedments). This result may mirror the general regularity that most sizable Swiss firms have to compete internationally because their production is to voluminous for the small domestic market. Additionally, it may also explain why size and quality competition are also positively related among older enterprises. Instead, new firms show the expected negative correlations typical for dynamic new product lines and expanding, yet unconsolidated customer markets (Table 5.4). Table 5.4 : Correlations between firm size
and intensity of quality competition: comparing older and younger firms.
5.1.3 Is price competition affecting organizational growth or decline? Given the rather high competitiveness of Swiss
firms (especially on international markets), we don’t expect that high levels price
competition generally causes them to stagnate or falter. Nevertheless, the
assumption remains reasonable that high challenges on the price front may result
in shrinking nominal sales: because even when constant volumes are marketed,
they will generate less revenue when they have to be sold at sinking prices. As the crosstabulations of Table 5.5 show, the
expected negative correlations between price competition and firm expansion are
limited to the tertiary sector. Here, the share of expanding businesses reaches
maximum (and the rate of shrinking as well as stagnating firms lowest) levels
when price competition is weak or inexistent, while exactly the reverse
conditions hold when intensive price pressures prevail. Table 5.5: Level of price competition and
development of earnings: firms in the industrial and in the service sector
In the preceding introductory chapter, it
has been argued on theoretical grounds that price competition and quality
competition demand highly contradictory measures for successful adaptation,
so that at least some firms may be quite unable to expand successfully
when both of them are intensive (see 3.5). Thus, while price competition for itself
has evidently no considerable impact on organizational development, we
may still argue that growth opportunities are hampered when high price
and quality competition are simultaneously present. In fact, the percentage of unsuccessful
(=shrinking) firms reaches a maximum (40%) when the intensities of both
price and quality competition are high, and a minimum (18%) when both of
them are low (Table 5.7). On the other hand, maximum percentages
of expanding firms are found in niches where high quality competition
and low price competition are combined (Table 5.8). Evidently, many Swiss
firms get stimulated to high performances when they are challenged to produce
high-quality goods - but only when they don’t face heavy restrictions to
minimize current costs. Symmetrically, absence of quality competition may
work as a disincentive: making them less fit for survival and growth when
they face intense competition on the level of costs and prices. Table 5.7: Percentage of firms with
shrinking
sales under different combinations of price and quality competition.
Table 5.8: Percentage of firms with
expanding
sales under different combinations of price and quality competition.
5.2 Competitive intensity and staff qualifications 5.2.1 The general impact of price and quality competition on the qualificational composition of staff For three reasons, it can be expected that the current as well as the envisaged composition of firm staff (in terms of different skill levels) covaries with the degree of price and quality competition to which a company has recently been exposed. First, competitive environmental
relations have a direct impact on the problems and role duties with
which many members are confronted. Thus, advanced technical qualifications
may be needed for reaching and maintaining high quality levels of products
and services; sophisticated social skills are indispensable for persuading
customers who can choose among many other attractive offers; and creative
management performances are necessary in order to outperform competitors
in timely innovations and marketing endeavors.
Quality competition has
also highly similar impacts in both economic sectors. In almost perfect
symmetrical opposition to price competition, it goes along with a significant
expansion on the two highest skill levels and a lower percentage of unskilled
employees. All these effects are somewhat more pronounced in the industrial
than in the service sector. As in the case of price competition, the demand
for apprenticed staff seems to be unaffected by the degree of competitive
environmental pressures (Table 5.10).
5.2.2 The general impact of price and quality competition on envisaged changes in staff competition It might be hypothesized that current competitive pressures have rather limited impact on current staff, because the size as well as the composition of employees is mainly determined by conditions of the past and cannot be easily modified when factors of competitiveness are changing (e.g. because hiring and firing is hampered by various laws and informal traditional norms), Instead, present competition may well determine whether firms have the intention of increasing or decreasing their staff, and if they do, which skill levels will be predominantly affected. When they face intensive price competition, cost pressures may force them to implement general downsizing strategies involving all staff categories, and/or to introduce more standardized production methods which allow them to substitute expensive highly educated members by cheaper personnel on lower levels of skill. Such deskilling may be more common in the industrial than in the tertiary sector, because the production of physical goods lends itself better to routinized technical procedures than the production of services (particularly when these are offered to other businesses). On the other hand, quality competition will engender expansion measures on the level of higher wage groups, because high skills are crucial for improving and maintaining high quality standards, and because cost minimization is not a predominant concern. Table 5.11: Envisaged growth of labor
force on different skill levels: contrasting firms with different
degrees of competition (firms in the industrial sector).
As can be seen in Table 5.11, the first of these hypothesis is not borne out for firms of the industrial sector, because firms coping with low price competition show no consistent lower tendency to envisage a net expansion of their staff. To the contrary, price competing industrial businesses are more likely to expand personnel on all qualificational levels. This may indicate that they are in fact successfully competing (or that they intentionally expand in order to be able to save costs by realizing more economies of scale). On the other hand, at least service firms conform somewhat to the second hypothesis insofar as they react to high price competition by a reduced tendency to increase academic personnel, and by a heightened inclination to hire additional staff on the second-lowest level of skill (Table 5.12). Table 5.12: Envisaged growth of labor force on
different skill levels: contrasting firms with different degrees of competition (firms in the service sector).
Looking at quality competition, high intensity
is associated with increased expansion of academic personnel in the industrial
as well as the service sector, and in industry as well with a significant
growth of employees with advanced vocational diplomas. On the other hand,
the need for more unskilled personnel is not consistently affected (Tables
5.11 and 5.12). Table 5.13: Correlations between degree
of quality competition (1995) and the planned expansion of staff on different
skill levels (1996-99) contrasting firms under different levels of price
competition.
5.2.3 Firm size as an intervening factor The theoretical expectations concerning the impact of price competition on staff skill levels is borne out only for smaller businesses, which tend to reduce academic employees and increase unskilled personnel when cost pressures are very high. (Table 5.14). Contrarily, larger firms show lowest shares of highly skilled staff (academicians as well as employees with advanced degrees) when price competition is low. But considering extremely few large firms face low levels of price competition, no secure conclusions from these figures can be drawn. In fact, the expected differences show clearly up when firms on medium and high competition levels are compared. Table 5.14: Mix of staff skills and
degree of price competition: contrasting smaller and larger firms.
On the other hand, the impact of quality competition is much more pronounced in larger than in smaller firms. Thus, the share of highly skilled personnel reaches extremely low levels in large enterprises exposed to low quality competition, while their percentage of unskilled employees is correlatively very high (Table 5.15) . In smaller businesses, the skill level is generally higher regardless of environmental conditions, and (with the exception of academic personnel) the effects of intensive quality competition - while pointing in the predicted direction - are too weak to warrant any valid interpretations. Table 5.15: Mix of Staff Skills and
Intensity of Quality Competition: contrasting smaller and larger
firms.
All together, the findings support at least partially the hypothesis that larger firms have more leeway to adapt their human skills to environmental competitive conditions. When a firm is small, it still needs a certain nucleus of skilled employees for securing its primary functions even when product quality requirements are not very pronounced, and given its small absolute size, this nucleus will easily constitute a rather significant percentage of the whole staff. By contrast, larger firms can make use of various economies of scale (e. g. because the same highly-skilled persons can easily serve a much larger organization), and given their larger production output, they have far better possibilities to introduce Taylorist (= routinized and skill-saving) methods of production.
5.2.4 Organizational age as an intervening variable On the lowest skill levels, older and newer firms show no differences in the way they adapt to the two modes of competition. Both samples show a similar tendency to increase the share of unskilled staff when intensive price competition prevails, and to decrease it when quality competition is dominant (Tables 5.16 and 5.17). This indicates that recently founded firms are as well as traditional enterprises disposed to apply “Taylorist” methods of deskilling when they are forced (or allowed) to minimize costs in the sphere of human resources. On the other hand, they diverge highly in the degree to which they adapt their labor force on higher levels of skill. When newer firms face low price competition or high quality competition , they primarily expand their highest skill segments (employees with advanced or academic degrees), while older firms mainly increase their second-lowest skill segment: personnel with ordinary vocational education. Table 5.16: Mix of Staff Skills and
Intensity of Price Competition: Contrasting Older and Younger Firms.
Table 5.17: Mix of Staff Skills and
Intensity of Quality Competition: Contrasting Older and Younger Firms.
This finding is highly consistent with Stinchcombe’s hypothesis that under all environmental circumstances, older firms are perpetuating structural attributes they have acquired “genetically" at the time of their birth; and that one of these traits is a rather low share of highly educated staff (Stinchcombe 1965). Thus, we might cautiously conclude that older firms are characterized by internal inertias which limit their capacity to upgrade their performances by making use of higher educational knowledge. Instead, they tend to shift these burdens on personnel with rather low vocational education . By doing this, they may well be able to offer “solid reliable quality” typically associated with craft-like productions,. but not well capable of implementing any product or process innovations which have to be considerably based on sophisticated R & D.
5.2.5 Market dynamics and organizational development as intervening variables The same competitive conditions may affect
organizational structures, strategies and processes very differently under
conditions of current (or envisaged) expansion, stagnation or decline. Thus, firms operating in
shrinking markets
have little leeway to adapt on the level of personnel, because future earning
perspectives are not bright enough to hire expensive additional employees.
Downsizing firms in particular have little opportunity to change their
staff composition in the direction of higher skills, because dismissals
have often to be made by other criteria than qualification (e. g. by rules
of seniority). Under expanding conditions, firms have
much more room for rational adaptation because they can decide precisely
what kind of additional personnel they want to recruit; and they will be
quite well disposed to commit themselves to highly paid employees (who
usually have to be guaranteed long-term security of their jobs). Table 5.18a: Percentage of employees
with academic degrees in firms with different combinations of price
and quality competition: contrasting firms in expanding vs. shrinking markets.
Table 5.18b: Impact of price and quality competition on the percentage of employees with academic or advanced
degrees: contrasting firms in expanding and in shrinking markets. (Linear
Regression Models).
Symmetrically, low-skilled work forces as a correlate of low quality competition are also somewhat most frequently found in firms operating in expanding markets (Table 5.19a and 5.19b). This can easily be explained within the framework of traditional theories of industrial organization. The traditional Fordist paradigm implies that when firm have to cut costs in order to maintain competitive prices, they do this by implementing “Taylorist” structures resulting in higher formalization, centralization and role specialization and (at least on subordinate levels) in a general downgrading of demanded skills. In addition, this view implies (at least implicitly) the assumption that markets are ever expanding, so that it pays out to invest in such heavy-handed strategies of reorganization (there are good chances that the resulting rigid structures can be maintained), and that the resulting large-scale mass production will be absorbed. Table 5.19a: Percentage of unskilled
employees in firms with different combinations of price and quality
competition:
Table 19b: Impact of price and quality
competition on the percentage of unskilled employees: contrasting
firms in expanding and in shrinking markets. (Linear Regression Models).
When markets are stagnating or shrinking, these conditions are no longer fulfilled. Instead, high price competition may enforce lean (or “Toyotist”) production styles which allow to produce craft-like customized goods (demanding rather highly skilled personnel) on reasonable low levels of total cost. Therefore, it is to be expected that only expanding firms in expanding markets show a clear tendency to react to price competition with a major deskilling of their staff. This hypothesis is clearly borne out in Table 5.19a and 5.19b which show highest effects of price competition on the share of unskilled personnel when markets are in expansion. Under shrinking conditions, the degree of quality competition evidently has no impact when price competition is low, and when it is high, the theoretically expected effects are visible, but rather weak. (Tables 5.19a and 5.19b) Overviewing all these findings, it seems
safe to conclude that expanding markets provide a more propitious environment
than shrinking markets for adapting the labor force to external competitive
needs. Table 5.20: Level of Quality Competition
(1995) and expected growth of labor force on different skill levels (1998-00):
As shown in Table 5.20, all these theoretical
expectations are basically borne out. Thus, very few firms in contracting
markets intend to hire additional academic staff in the coming years, and
this reluctance does not diminish when they have to cope with intensive
quality competition. Under expanding conditions, about a quarter of all
enterprises plan new academic recruitments when quality competition is
low, and half of them when it is very high. On the other hand: while staff
with advanced diplomas is also less often increased when markets are shrinking,
a similar positive correlation with quality competition holds as in expanding
markets. When firms in contracting markets want
to grow, they are most likely to do this on the second-lowest skill level
(employees with apprenticeship), particularly when quality competition
is so low that no additional staff with advanced degrees is necessitated. To summarize, it can be concluded that “market development” has to be treated as a causal variable and as an intervening variable at the same time. As a causal factor, it offers an environment which (1) facilitates changes in skill mix on all levels, but (2) necessitates to concentrate new recruitments on rather high levels of skill. And as an intervening variable, expanding markets seem to widen the space enterprises have available for far-reaching adaptations on the level of human resources, while shrinking markets provide constraints which reduce a firm’s capacity to deal effectively with high levels of quality competition.
5.2.6 Domestic vs. international market orientation as an intervening variable While domestically oriented and exporting firms tell us that they are exposed to roughly similar degrees of quality competition, the factual pressures resulting from it may nevertheless not be the same. Thus, export-oriented businesses are much more likely to face the world’s most qualified and dangerous competitors existing within their field: challengers equipped with far higher staff skills and far superior resources for R & D. Table 5.21: Correlations between the
intensity of quality competition and the percentage of different skill
segments in the firm’s labor force: contrasting firms with different share
of exports (Pearson Correlation Coefficients).
In fact, the findings show that the theoretically
expected relationships between quality competition and staff skill levels
are significant exclusively in the case of outspoken export businesses
selling more than 60% of their total output abroad. While firms with the
next lower export rates (30-60%) still show weaker (statistically not significant)
correlations pointing in the same direction, fully domestic enterprises
don’t show any statistical relationships at all (Table 5.21). These highly consistent results strongly
corroborate the hypothesis that export orientation is a necessary precondition
for quality competition to have any influence on the composition of a firm’s
human resources. 5.2.7 Comparing successful and less successful firms In order to identify functional relationships
between competition pressures and optimal forms of organization, it is
useful to look at the more successful firms, because these are most likely
to be adequately adapted to their current environmental challenges. In
the case of unsuccessful businesses, on the other hand, at least one reason
for failure may lay in their lack of adaptive responses on the level of
human resources, caused by inertia, inadequate perception of needs, managerial
deficiencies, or many other reasons. Table 5.22: Correlations between the
intensity of competition and percentage of different skill segments in
the firm’s labor force: comparing expanding and shrinking firms (Pearson
Correlation Coefficients).
Table 5.23 Correlations
between percentage of staff on different skill levels (1997) and expansion/shrinkage
of firm sales (1995-97): contrasting industrial and service firms
under different levels of quality competition.
On a theoretical level, it is evident that both types of competitions constitute highly different environmental constraints, so that firms which want to cope successfully with them are force to follow highly divergent - even contradictory - strategies - on the level of their activities as well as on the level of personnel recruitment and organizational structure. When intensive price competition creates an incentive to lower costs by hiring less skilled personnel, we may well assume that such strategies are only viable when lower skills are not harmful to sales because quality competition is low. And vice versa: when high quality competition makes it instrumental to expand employee segments with advanced and academic education, such upgradings can only be made when the minimization of costs is not imperative (because price competition is moderate or absent). Table 5.24: Correlations
between percentage of staff on different skill levels (1997) and expansion/shrinkage
of firm sales (1995-97): contrasting firms under different combinations
of competition.
In fact, the correlation coefficients in Table 5.24 are highly compatible with these two argumentations. They clearly demonstrate that
Thus, it can be concluded that at least on the level of human resources, both types of competition necessitate highly incompatible, mutual interfering strategies of adaptation, so that when both competitions are intensive, firms are in a rather ambiguous situation because no skill mix exists which would maximize survival and growth.
5.3 The scope of advanced training While all firms try to cover their basic
needs of qualification by recruiting personnel with the desired formal
vocational education, this strategy alone will never be sufficient to procure
all skills needed for optimal organizational performance,
Both of these reasons have been particularly
salient for many Swiss firms in the last years (even in times of recession),
because unemployment rates have remained low and particularly the supply
of specialized technical personnel has been continuously short. Table 5.25: Percentages of firms making
use of internal or external programs of formalized advanced training.
What relationships between the intensity of competition and the scope of advanced training have to be expected? First of all, it can by hypothesized that
high quality competition makes it necessary to enlarge such involvements,
because - as stated by TQM [14]
philosophy - reliably high quality standards can only be maintained when
most employees possess rather high specific skills (including an adequate
understanding of the production process as a whole). Secondly, it might be guessed that too
harsh price competition may curb a firm’s capacity to provide advanced
education, because such programs are costly (in terms of teaching expenses
as well as in terms of lost working hours). By combining these two propositions, we
may deduce that involvement in advanced training reaches highest levels
when quality competition is intensive and price competition low, while
it will be lowest when the reverse conditions hold. Table 5.26a: Percentage of staff included
in programs of advanced vocational training and degree of competition (total
sample).
Table 5.26b:
Impact of price and quality competition on the percentage of staff included
in programs of advanced training (Linear Regression Models).
Again, these hypotheses are consistently corroborated by the percentage figures of Table 5.27a. As to be expected, enrollment in advanced training is generally lower under shrinking market conditions, and it is particularly low when such pessimistic perspectives coincide with a market where price competition is high and quality competition medium or low. Table 5.27a: Percentage of staff included
in programs of advanced vocational training and degree of competition:
contrasting firms in expanding an in shrinking markets.
On the other hand, highest percentages of staff are participating when markets are expanding and the most fortunate competitive constellation (low price and high quality competition) prevails. Nevertheless, there is no indication that price competition effects are neutralized when markets are in expansion; to the contrary, they are most pronounced in these cases (at least when quality competition is medium or high). As can be inferred from the linear regression models, market expansion seems to be an intervening variable amplifying the impact of both types of competition on enrollment; while market shrinking seem to depress enrollment largely independent of competitive circumstances (Table 5.27b). Table 5.27b: Impact of price and quality
competition on the percentage of staff included in programs of advanced
training: contrasting firms in expanding and in shrinking markets. (Linear
Regression Models).
Apart from market development, major differences
might also be expected between export firms and firms focusing on domestic
markets: When exporting firms are exposed to high
price competition, they are likely to be under extreme pressures to reduce
costs (in order to succeed against cheap competitors from low-wage countries).
Thus, their resources for advanced training may be very restrained. When high quality competition prevails
on international markets, it is likely that extremely high upgradings in
performance have to be achieved in order to prevail against firms with
much higher human resources and expenses for R&D. As a result, very
high enrollment rates should be expected. Table 5.28a: Percentage of staff included
in programs of advanced vocational training and degree of competition:
contrasting firms selling on domestic and on international markets.
Table 5.28b: Impact of price and quality competition on the percentage of staff enrolled in programs advanced training: contrasting firm-selling on domestic and on international markets (Linear Regression Models).
Any firm’s commitment to advanced training
will not only be conditioned by environmental (e. g. competitive) conditions,
but as well by various intraorganization factors. In particular, it might
be suggested that involvement rates covary positively with the skill level
of the labor force, because higher-skilled employees are usually better
able to acquire new knowledge: particularly in programs which heavily rely
on theoretical materials and on self-directed learning. Very often, high
educational certificates are not demanded because they go along with specific
knowledge and competences, but because they indicate that a person has
been (and will continue to be) motivated and capable of internalizing and
mastering considerable packages of knowledge and/or because besides specific
contents, generalized “learning-to learn” capabilities have been acquired). In addition, positive correlations may
also result from the fact that intraorganizational programs for advanced
training can be more encompassing when a large number of highly educated
employees are available for teaching purposes. Table 5.29: Correlations between the
percentage of staff involved in advanced training programs and the percentages
of different skill levels among employees: according to the degree of price
and quality competition.
Similar to recruitment practices, programs
of advanced training are not automatic responses to competitive (or other
environmental) circumstances, but deliberate firm policies which may be
enacted too late or not at all, or which may even go in a counteradaptive
direction. Thus, correlations between competitive
intensities and shares of involvement may well be diminished by all firms
not behaving in such a “rational” manner. Nevertheless, such maladaptive
businesses may be punished by stagnating or even shrinking earnings, while
“adaptive” enterprises may be rewarded by growth. If this argumentation is true, the expected
correlation between competition and enrollment should turn out to be higher
in the subsample of successful firms. Table 5.30: Correlations between the
intensity of competition and the percentage of staff enrolled in programs
of advanced training: expanding and shrinking firms in the industrial and
the service sector (Pearson Correlation Coefficients).
5.4 The scope of introductory training In addition to the various formal and
informal qualifications internalized in antecedent processes of socialization
and education, every job also requires highly specific role-related skills which
can only be acquired by practicing it for a certain time. Thus, routinized
behavioral habits are necessary in order to handle the specific tools and
machineries with maximum efficiency and reliability and a minimum of fatigue,
and detailed knowledge about organizational procedures and informal collaboration
networks has to be gathered in order to solve problems effectively and
in accordance with established rules. Of course, the average time needed for
acquiring these operative skills depends on a multitude of different variables:
with environmental conditions and technological factors as well as with
cooperative arrangements within work units and cultural and structural
characteristics of the encompassing organization. Thus, quite extended introductory phases
are needed in organizations which provide a large variety of hand-tailored
services to a variety of highly different customers (e. g. advertising
agencies or business-counseling firms) or in rather small traditional production
settings where handicraft-like production methods are still in use. On the other hand, minimal initial work
experience is required in common retail stores selling standardized consumer
items or in highly “Taylorized” firms engaged in large-batch mass production
on the basis of highly specialized and simplified roles. Consequently, we have good reasons to speculate that
As seen in Table 5.31, these expectations are only partially borne out. In the industrial sector, two consistent regularities stand out: introductory time is evidently lowest when quality competition is absent and price competition is moderate or high; and the positive effect of quality competition on operative role complexity is much higher when price competition is moderate than when it is high. On the other hand, rather long periods for acquiring work experience are also needed when competitive pressures in both dimensions are low. This indicates that apart from competition, there may be a second basic cause for extended learning periods: traditional handicraft-like production methods which have best survived in rather “protected” businesses little affected by competitive pressures. Table 5.31 Average number of working
days new entrants need for becoming efficient and routinized workers under
various competitive conditions: contrasting industrial and service enterprises.
Such traditional residuals may be less present in the service sectors where low learning requirements prevail when both modes of competition are absent. Service firms also show pronounced positive effects of quality competition but (diametrically opposed to industrial companies) only when price competition is either high or low. In contrast with industrial firms, they also don’t seem to “Taylorize” their roles structures when price competition is high. The effects of both quality and price competition are very much amplified when firms operate in expanding markets, while they almost vanish when they face stagnating or shrinking conditions. (Table 5.32). In particular, very simple operative roles seem to prevail when growing markets go along with low quality and high price competition. This accords well with the hypothesis that expanding markets offer best chances to introduce Taylorist production methods, because large-scale mass production is possible and even highly expensive investments in complex technologies and organizational designs are likely to pay out in the near future. Table 5.32 Average number of working
days new entrants need for becoming efficient and routinized workers under
various competitive conditions: contrasting firms in expanding and shrinking
markets.
On the other hand, such role-simplifying strategies seem to be much hampered when firms operate on international markets. Under all competitive conditions, exporting firms report longer periods of initial role socialization than firms which sell their products or services exclusively on domestic markets (Table 5.33). This may at least partially be due to the fact that most exporting firms sell their services or products to other corporations: i. e. highly qualified customers which usually articulate higher quality demands than typical individual consumers. Table 5.33: The impact of competitive
intensity on the number of working days needed for becoming a fully productive,
efficient worker: contrasting exporting and non-exporting firms.
Finally, it is not surprising to find that “Taylorist” reaction strategies to high-price / low quality competition are much more pronounced in the case of larger firms (Table 5.34). Evidently, certain levels of large-scale production have to reached in order to make investments in such cost-saving methods economically feasible. In smaller firms, deskilling is hampered by the fact that everybody around has (at lest sometimes) also to deal with more sophisticated tasks. Table 5.34: The impact of competitive
intensity on the time needed for becoming an efficient and routinized worker.
(number of working days): Contrasting smaller and larger firms.
Concerning the amount of introductory training,
informants were additionally asked whether the average time needed to become
a fully productive workers has recently increased, decreased or remained
on the same level. Given that 41% of alls businesses reported an increase
(and only 6.6% a decline), the conclusion is warranted that within most
economic settings, work roles are currently becoming more complex and demanding
(e. g. because of measures of downsizing or lean production) while conventional
“Taylorist” strategies of role simplification are restricted to rather
few (mostly larger-sized) firms. Table 5.35: Percentage of firms in which
the time needed for mastering operative work-roles has recently increased:
comparing industrial and service firms facing different intensities of
competition.
5.5 The Impact of Competition on the importance of various skills By focusing exclusively on the formal level
of vocational education, the antecedent empirical analysis was severely
insufficient to grasp the full impact of competitiveness on the requirements
for skills. First of all, it has to be acknowledged that preferences for
formal certificates are also (and in some cases foremost) determined by
status considerations and/or specific occupational traditions, not by functional
necessities associated with specific environmental conditions, work problems
and organizational roles. And secondly, many essential work skills are
“informal” in the sense that they can either be acquired outside formal
educational settings (e. g. foreign language or computer skills) or not
be systematically acquired at all (e.g. social competencies and character-related
skills). On a most general level, we may hypothesize that high price competition lowers the requirements and narrows the range of required skills, because it gives rise to cost-saving (Taylorist) production strategies which are associated with rather specialized , routinized and undemanding roles. In particular, we expect that more generalized skills not immediately related to the job should get lower ratings, because the have no place in rigorously structured production systems where the skill demands of all work roles are invariant and explicitly known in advance. Quality competition, on the other hand, can be expected to broaden the range and raise the level of required skills, because sophisticated workers are needed for upgrading quality levels of products and services and maintaining high regular standards during time. In particular, the new “Total Quality Management” methods imply that all employees on all levels are drawn into firm-wide learning processes in order to increase continuously their understanding of production processes as well as their personal qualifications: a strategy which in turn presupposes that employees are skilled enough to acquire additional skills. As seen from Table 5.37, most of the respective correlations coefficients are disappointingly low or insignificant, at least some of these expectations are borne out. Looking at the entire sample, high price competition has evidently the effect of lowering the salience of rather generalized skills which are only weakly related to the specific job:(general education, foreign languages, computer skills and communicative skills), while these same qualifications are more required under intensive quality competition. The lower demand for planning and organizing skills and for “self guidance” capacities underlines the assumption that intensive price competition goals along with Taylorist” production methods associated with highly controlled and restrictive roles. “Manual dexterity” (the skill most tightly associated with concrete work behavior) is the only qualification boosted by such conventional socio-technical systems. Quality competition, the other hand, seems to raise the need for personal creativity and flexibility as well as for various social qualifications needed for the maintenance of highly communicative and team-oriented structures. Table 5.37: Correlations between intensity
of competition and the importance of various skills for ordinary operative
employees: industrial and service firms and total sample
Many of these correlations vanish or become insignificant when the total sample is broken down into industrial and service organizations. Thus, the negative impact of price competition on the need for foreign languages and computer skills (and its positive correlation with manual skills) is seen exclusively in the tertiary sector, while its lowering effect on general education and self-guidance seems to be restricted to industrial firms. Similarly, quality competition seems to have divergent consequences: increasing primarily the need for computer and communicative skills in the industrial sector and the demands for flexibility and conflict resolution skills in the service branches (where dealing with customers is the foremost operative task).Interestingly, neither the salience of special vocational knowledge nor the requirements for longer-term work experience are in any way affected. These two items may well be seen as core competencies intrinsically related to the production of goods and services alike: so that they maintain their foremost significance irrespective of competitiveness (or other environmental factors). Given that the general downskilling effect associated with Taylorist production methods, it might be expected that the total scope of required competencies is lower when intensive price competition prevails. On the other hand, this effect may well be weakened or neutralized when firms face high quality competition at the same time, because this would force them to maintain rather high skill levels despite the pressures to cut labor costs. Consequently, we expect lowest skill diversity when price competition is high and quality competition rather low. For testing this hypothesis, we calculate a summative index which expresses how many (out of 12) competencies are considered to be “essential” or even “indispensable” for doing the average operative jobs. Conforming to our theoretical expectations, the results of Table 5.38 show that the required diversity of skills declines with increasing levels of price competition, and that this effect is most pronounced when quality competition is low. In the industrial as well as in the service sector, price-competing firms are only able to perfectionize cost-cutting Taylorist procedures when they don’t face countervailing upskilling pressures stemming from quality competition. Older firms (founded 1930 or before) are most likely to keep skill demands minimal when they operate under medium or high price competition. This indicates that they have realized classical principles of Taylorist organization more pervasively than younger firms which seem to be committed to more homogeneous higher-skill work forces even when cost pressures stemming from price competitiveness are rather high. Table 5.38: The impact of competitive intensity on the average number of skills* which are rated to be “essential” or “indispensable” for ordinary operative employees 1) Contrasting industrial
and service enterprises
5) Contrasting older
and younger firms
As elaborated above (see 5.2.6), export
orientation may be considered a salient intermediary variable which
moderates the causal impacts of competitive intensity on the requirement
for human skills. Thus, highly pronounced price as well as
quality competition may create more profound problems for exporting firms
than for enterprises which produce for domestic markets, because when competitors
originate from many different countries, at least some of them are likely
to be highly superior in efficiency, innovativeness or any other salient
trait. Consequently, correlation coefficients
between competitiveness and skill demands should be higher in internationally
oriented than in pure domestic firms. Table 5.39: Correlations between intensity
of competition and the importance of various skills for ordinary employees:
contrasting exporting and nonexporting firms
Like in previous steps of our analysis,
we may hypothesize that the correlative relationships between competitiveness
and skill demands are weakened by those “irrational” firms which do not
adequately perceive what skills are necessitated for adapting most successfully
to their environmental conditions. Such informational deficiencies may
be particularly severe here because managers cannot be supposed to have
adequate insight into the specific work roles on the operative levels -
especially in larger enterprises where they are physically and structurally
quite removed from the subunits where the daily production of goods or
services takes place. Table 5.40: Correlations between intensity
of competition and the importance of various skills for ordinary employees:
contrasting expanding and nonexpanding firms
Thus, successful firms are much more likely to adjust their skill requirements to competitive relations: reducing their needs for a broad range of generalized skills on the one hand and raising it for manual dexterity on the other. Nonexpanding firms, on the other hand, show almost no reaction to price competitiveness, except by downgrading the importance of “general education”. Concerning the impact of quality competition, no definite conclusions seem warranted: except by noting that successful firms are somewhat more prone to upgrade the salience of foreign language, organizational skills and flexibility, while stagnating or shrinking companies rely more on creativity and general education. Thus, we might cautiously conclude that deskilling “Taylorist” rationalization strategies are (still) a highly functional for business success when price competitiveness is very pronounced, while “upskilling” strategies (e.g. associated with lean production methods) may prove not quite as functional when high quality standards have to be reached (or maintained).
Based on a contingency model of organizations
which stresses the causal interrelationships between environmental constraints
and intraorganizational structures, this paper has tried to corroborate
the hypothesis that the degree of competition to which a firm is exposed
in its sales markets has heavy impacts on its demand for staff skills and
its disposition to upgrade such skills by advanced training. These hypotheses were clearly borne out
by the empirical findings which showed that price and quality competition
Evidently, intensive price competition is
the correlate of a cost-minimizing “Taylorist” strategy which is most prevalent
in the segment of older and larger firms. Businesses of this sort rely
heavily on unskilled employees, while showing little inclination to increase
academic staff or to upgrade qualifications by advanced training. By contrast, intensive quality competition
is most often found among younger and smaller enterprises: firms which
then feel the need to make heavy investments in highly-skilled employees. With increasing age, the firm’s sensitivity
toward both competitive impacts seem to decline. Because of internal inertias
or external “legitimation factors” which shield them from environmental
impacts, they especially tend to maintain low percentages of academic personnel
irrespective of their situational conditions. There is an asymmetry in the causal status
of both dimensions: in the sense that price competition acts as an overriding
condition. Whenever it is high, firms seem to become insensitive to quality
competition, because they may lack the “discretionary resources” needed
for upgrading their skills. Given the cross-sectional design of the empirical analysis, it is evident that no secure conclusions about the prevailing directions of causalities can be drawn. While the time lag between the measurement of the explanans (1996) and the explananda (1998) is conforms with the older contingency paradigm which sees organizations as systems affected by given environmental conditions, there is still the possibilities that the correlations found can at least partially be explained the other way round: e. g. by the regularity that organizations are more likely to expose themselves to certain competitive market conditions when they possess a certain skill composition within their staff, or when they are characterized by a “learning culture” which encourages advanced training.
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