THE RELEVANCE OF TRAINING AND HUMAN RESOURCE SYSTEMS AND NATIONAL VOCATIONAL EDUCATION AND TRAINING SYSTEM WITH SKILL FORMATION IN AN ORGANIZATION
INTRODUCTION
The workforce of business firms plays a vital role in organizational survival. They are people with diverse abilities, aspirations and motivations that should be properly exploited and developed in order to secure the effective operation of the business. According to Burke and Cooper (2004) most organizations today effortlessly duplicate technology, manufacturing processes, products and strategies in order to get ahead of the competition. However, skillful human resource is difficult to copy. To gain organizational competitiveness and be successful, organizations will have to build a distinct organizational culture that produces an efficient and valuable human resource (p.3).
This research study will look into the relevance of human resource and training systems inside an organization, and vocational education and training systems of a country in addressing needs for highly competent workforce of business organizations. The study will attempt to discuss the debate on where should a business organization rely for skillful people – from its internal training system or from highly educated products of academic and vocational institutions. The paper will try to separately discuss the context of organizational strength through in-house training mechanisms using the Firm Internal Labor Market Theory, and the functions of the vocational education and training system and the occupational labor market in producing skilled manpower before formulating a conclusion. The paper will utilize the readings and academic sources provided in the course as well as some relevant sources from the Internet. The paper is divided into different headings to guarantee a concise and clear presentation.
THE FIRM INTERNAL LABOR MARKET THEORY (FILM)
The Firm Internal Labor Market Theory (FILM) came into being after two Japanese students named Kazuo Koike and set out an evaluative study on skill formation in Asia through the cement, car battery manufacturing, machine tools, and banking industries in the middle part of the 1980s. The Film’s key argument is that the process of skill formation among the workforce takes on full essence through on-the-job training (JOT) (‘Labor Market Theory’, p. 39). McNabb and Whitfield (1994) state that working individuals unconsciously consume a fraction of their working time performing and learning technical skills which boosts their productivity over time (p. 3). The two proponents of the theory assert that a worker who experiences a long-term process of skill acquisition and learning while performing his tasks and responsibilities for a certain job will be able to steadily incorporate adequate knowledge and expertise that can help him confront unexpected circumstances in the workplace (‘Labor Market Theory’, p. 39). Heckman (1999) posits that workplace education and learning is an important source of skill formation that accounts for as much as one-third to one-half of all skill formation in a modern economy. On the job training and education thoroughly trains the workforce in the various generic skills which may include communication skills, problem solving, teamwork, and positive work dispositions (p. 86). The two Japanese proponents of the Firm Internal Labor Market Theory has found out in their study that the Japanese workforce who has undergone more extensive skill formation process than their Malaysian and Thai counterparts are effective in delivering superior productivity. They are more skilled in problem solving and are able to deal more effectively with unpredictable occurrences in the daily course of their work (‘Labor Market Theory’, p. 39). The obvious correlation between skill formation through on-the-job training and excellent productivity has encouraged many business firms to offer supplemental job-specific skills training to their manpower in order to help them strengthen their job-related competence and their marketability in general (Streak, 1989, p. 1). Furthermore, the theory formulated by the two Japanese intellectuals is fundamentally driven by the problem of skill shortage faced by the market economy in contemporary times. Many modern economies and societies today are greatly concerned with transforming themselves into high skills and knowledge-driven characters as a response to the turbulent and fast-paced business environment that most business organizations face. Skills are heralded for being one of the most potent weapons that modern societies can possess in their pursuit of economic growth, higher wages for workers, lower rates of unemployment, sustainable welfare state, and equal opportunities for all citizens (Lloyd and Payne, 2005, pp. 165, 167,). Ashton and Green (1996) reports that the focus on high-skill, high-wage economy has fueled the birth of citizens adopting the mindset of “citizens as workers” in many capitalist societies characterized by their willingness to increase their support for and participation in the use of modern technology, advancement in job prospects and deliver remarkable performance in their daily tasks at work. There is also an increase in the number of employers and companies who become aware that worker participation in training and skills formation can spell more profits and can define the competitive edge of the company (p. 1). A high-skill economy triggered the gradual progress in the system of mass production and posed a new demand for technical know-how and problem-solving capacities in the manufacturing sector. To cope up, societies who have great proportion of manufacturing industries in their economies elevated the level of training and education in order to produce the kind of people who would possess the required competence (‘Explaining the Differences, p. 21).
The Firm Internal Labor Market Theory has three major elements namely on-the-job training, breadth and depth of skill, and reward and promotion systems. On-the-job training is considered as the most important element by the proponents of the theory because it is the primary avenue of the workforce to access most of the skills necessary in the modern economy; learn, practice and become familiarized with them, and then permanently incorporate them in their personalities. The proponents have identified two major reasons and two supplementary reasons why on-the-job training should be the core of skills formation processes in any business firm. The first major reason states that the nature of many skills and expertise cannot be fully expressed in words and theories. Learning these skills go beyond mere words and lecture. On-the-job training brings the workforce in the actual situations where these skills are warranted thus, helping these people to understand the function and applicability of these skills in various conditions. The second major reason represents the financial aspect of training which stipulates that on-the-job training is the most cost-effective kind of training that any business firm can invest in. On the other hand, the first supplemental reason works on the notion that training outside the job and the workplace can only impart general knowledge but the specificity of every job function can only be taught by the experience of actual work. Secondly, on-the-job training depends on the capability and competence of the person while off-the-job training (academic training) poses across-the-board tuition fees. The premise that on-the-job training can deliver effective skill formation through actual experience relies on two types of knowledge. Generalized knowledge encompasses the ideas from scientific knowledge base and those derived from research. Particular knowledge is more difficult to teach and learn since this includes the details of a particular job. The best way to convey and acquire particular knowledge is through imitation or the process by which an instructor transfers the skills on a certain job to the trainee. Through imitation, the trainee is obliged to learn the complex factors defining the skills, the procedures and technology governing the particular work, and the process of how the skills pertinent to the performance of a particular task progress from simple to complex operations. On-the-job training normally follows five specific steps. First, a trainer performs the tasks specific to a certain work while the trainee observes. Second, the trainee performs the tasks while the trainer observes and guides. Third, the trainee performs the task without guidance and the trainer provides comments on the performance afterwards. Fourth, the trainee completely assumes the job while soliciting the trainer’s advice and guidance when the situation calls for it. Finally, the trainee handles more complex and difficult tasks similar to the ones he previously handled. On-the-job training is also instrumental in teaching people to acquire skills relative to routine operations and unusual operations of the firm. Routine operations consist of the skills necessary to operate machines and accomplish clerical tasks. Unusual operations merit the more critical importance. These operations require the skills to confront unanticipated difficulties and risks that can possibly come in the course of work. Unusual problems can come in the form of change in the firm and problems of unexpected nature. Some types of skills that can deal with organizational changes include adjustments in machines and other tools for continuous production or a senior employee who can take all the tasks in a specific department when it is warranted or the ability to assume the tasks of an absent employee. Problems with unexpected nature can be best dealt with by employees who possess the ability to recognize conditions that can possibly pose problems to the firm, to assess the causes and underlying factors of the problem, to identify possible measures to solve the problem and prevent future occurrence, and to implement the best solution available in dealing with the problem. The second element of FILM is breadth and depth of skill which tackles the necessity for a worker to experience diverse tasks and job functions in different positions. This element states that a worker who handles numerous jobs of the same level has a greater exposure and familiarization with various skills. Also, workers who take time to pursue off-the-job trainings are able to enrich their intellectual and theoretical knowledge which can guide their actual practice in their jobs. The last element of FILM is reward and promotion systems. This element rests on the notion that workers are more motivated to learn skills if they are compensated for it. Thus, business firms should promote skill formation through its pay system and promotion mechanisms (‘Labor Market Theory’, pp. 40-41). The internal labor market system obliges firms to establish and maintain a pay hierarchy that reflects upward movement of jobs to affirm the progressive flow of skill formation. Firms must design a pay structure that provides higher compensation for higher level of skills and encourage long-term service (Grim Shaw, Ward, Rubbery, & Beyond, 2001, p. 42). Yearly increase backed up by merit rating is an effective strategy for the employees to stay in the company and make use of their skills. This also encourages the employees to accumulate greater number of skills and expertise in order to be assigned to a higher position that merits higher pay (1990, p. 2). Also, FILM states that to promote skill formation and higher productivity, firms must make the natural skill progression a basis for promotion. This means that promotion takes place within job clusters in an organization (Grim Shaw et. al., 2001, p. 38) and based on the ability to handle unusual operations or problems (Koike and Invoke, 1990, p. 2). For example, line staff are trained to prepare them for becoming group leaders; the skills of the group leaders are enhanced to train them as foremen; and these foremen will soon become supervisors (‘Labor Market Theory’, p. 41) while putting immense emphasis on how they can deal with unusual operations and unforeseen problems (Koike and Invoke, 1990, p. 2). The gradual progression of skills encourages employees to acquire more skills and learn more theories that can define their performance for more advanced positions (‘Labor Market Theory’, p. 41).
THE DEFICIENCIES OF THE FIRM INTERNAL LABOR MARKET THEORY
In-house skill formation through on-the-job training is said to be not viable at all times. Certain characteristics of the firm and on-the-job training per se pose some limitations to the effectiveness of the process. First, the history of the firm affects on-the-job training. Since formation of skills happens gradually, the firm has to have a long and stable history of operation. Employees would be discouraged to designate personal effort and investment in learning skills if they can see that the firm would not survive in the long run. Unstable history can also affect the manner that skills would develop and become established (Koike and Invoke, 1990, p. 3). Secondly, the Firm Internal Labor Market Theory developed out of a study on large corporations. The applicability of the system on smaller firms is not conclusive. The two proponents used business organizations with long period of operations and more than a hundred employees and they have found out that those firms have skilled and stable workforce. Also, a small firm with few employees is likely to have few departments/divisions which limits the diversity of expertise among the manpower. These attributes makes on-the-job training less essential since there is no diversity of skills and sufficient room for movement of job positions within the organization. Thus, it can be deduced that the Firm Internal Labor Market Theory does not have a component deemed appropriate for smaller companies (Koike and Invoke, 1990, p. 3; ‘Labor Market Theory’, p. 33). Thirdly, certain natures of business do not require the generation of technical and other work skills. Firms in the mining industry are greatly dependent on unskilled labor which makes on-the-job training inappropriate (Streak, 1989, p. 3). Likewise, Taylor’s organizations like those in the mass production of standardized products that usually break down work into fragment of tasks or require workers to have knowledge on their immediate job only, can make skills repetitive. Thus, skill formation is hardly a possibility (Streak, 1989, p. 3; International Labour Organization, 2007).
Another factor that impacts the effectiveness of on-the-job training is its feasibility in the contemporary business environment. The modern business environment is characterized by a free labor market wherein people who are capable and willing to work have the freedom to choose employment that can benefit them in the long run, and firms have unrestricted access to a pool of manpower that they can look into for their workforce needs. In this kind of environment employees can transfer from one organization to another. Hence, most employers are hesitant of investing in training for fear that employees who are rigorously trained during their employment at the firm would leave for other opportunities and the firm would not be able to make use of their expertise (Streak, 1989, p. 2). There is also a growing concern that since on-the-job training is an inherent component of daily job performance, no concise accounting cost can explain the amount that the firm actually foregoes in its implementation. This fact is a risk for technical cooperation agreements and transparency of the financial status of the business which both require concrete budget plans (Koike and Invoke, 1990, p. 6).
On-the-job training is also affected by current issues in the labor market. The prevailing problem on integrating capital and labor wherein there is a need to manage capital in a coordinated approach sees the call for skill formation and up killing as a deviation from the focus on capital. Some analysts actually believe that it would be best for the society to permit a group of minority or those who are highly able to pursue higher levels of learning and education to do so while permitting the vast majority of the population to find their niche in the flexible labor market (Ashton and Green, 1996, pp. 1-2). Kraal (2005) cites that globalization has only transformed the required skills of some portion of the society such as those in finance, information and communication technology, and international trade. However, the lower society which comprises the lower positions in the civil service and labor market hierarchy such as low-skilled workers in meat, leather and rubber goods, textiles, and meat industries are not affected by up killing. These people, though contributory to the overall economic performance of any country, would only waste time and effort in up killing endeavors. Their tasks are redundant and routinely. Mandatory skill formation within organizations would leave this group ignored and incompetent (pp. 59-60). What is considered more necessary are policies that would establish an education system that can educate a considerable proportion of the school-age population on intermediate-level skills in primary subjects; a regulatory system that can persuade employers to execute high quality workplace training within their firms; strategies that would offer incentives for people who would earnestly participate in personal skill formation and support that of others; and an institutional system that would offer sufficient amount of off-the-job training for working individuals who are committed to continuous learning (Ashton and Green, 1996, pp. 1-2). All these complicated issues render adverse impact of the proper and successful administration of on-the-job training.
Furthermore, the business environment today is operating in both technical and global spectra (‘The Acquisition of Skills,’ p. 59). The movement of labor across national boundaries is necessary to address the rapidly changing situations in the unstable global markets. Thus, manpower requirements are centered on finding the right people who are capable of discovering new ways of doing things. Multi-functional competence is indispensable as the business organization operating in the global market can experience changing nature of work which would require its workforce to shift into a wide array of enterprise activities such as computer programming and product or process development. Accordingly, there is a need for a manpower search with a global scope to be able to access greater number of people with diverse abilities and potential (Kraal, 2005, p. 58). The global context of workforce selection can make on-the-job training inadequate and more costly as there may arise a need for hiring an international consultant who can provide more qualified perspective on manpower skills requirements in the global market (Koike and Invoke, 1990, p. 7).
Finally, firms adopting the firm internal labor market theory have one distinct characteristic – their tendency to allow workers, with consideration of fundamental competence, to join the firm at the base of the workforce hierarchy, accumulate additional skills and expertise, and move up the hierarchy according to capability and seniority. Thus, on-the-job training loses some of its essence because workers who are allowed to be in business firms already possess certain types of skills upon their participation in the organization. In this regard, on-the-job training becomes a supplemental process in workforce skills formation (‘Labour Market Theory, p. 43).
THE NATIONAL VOCATIONAL EDUCATION AND TRAINING (VET) SYSTEM AND THE OCCUPATIONAL LABOR MARKET
Organizational skills and competence can be enhanced inside the business firm through structured on-the-job training that exposes employees to various skills while they perform their designated tasks. However, in-house mechanisms have its shortcomings mainly because of the factors in the firm and the outside environment. Since the business firm is a part of the larger society, other sources in the society can be harnessed to supplement the gap in skills training provided by the firm. Two prominent entities that can provide skills formation are the government and the occupational labor market. The focus on economic growth as a driving force for the pursuit of a highly-skilled society and economy is a distinct attribute of the developmental state. The developmental state is a society that is capable of advocating, achieving and maintaining economic prosperity through the integration of the state and civil community. This integration necessitates the concerted efforts of all sectors of society – politics, labor market, church, government, and the academe. Furthermore, the developmental state is a learning state that promotes advances in education and continuous learning among its citizens (Green, 1996, p. 2). Bardwell, Holden and Clay den (2004) claim that educated and skilled citizens make up a highly-competent workforce that can contribute to the effective operations in the economy, the proper allocation and utilization of the wealth of a state, and the general well-being of the society. In the present industrialized world, the government is obliged to act as overseer and manager of the long-term goals of the society. It has a vital duty of managing capital and labor through establishing an agreement on the types and delivery mechanisms of training and education in the labor market (Ashton and Sung, 1996, p. 4). This obligation came about with the prevailing behavior of some employers who do not want to invest in workforce training unless subject to state regulation (Ashton and Green, 1996, p. 2). One approach used by the government to secure the interests of the society is its effort to control the relationship of capital and labor. The government may assist the state in maintaining major industries and regulating the types of industries that will be established in the future. In relation to this responsibilities, the government coordinates the training system through three approaches. First, citizens are given freedom to decide and facilitate their own training. Second, the government can compel the society to design conditions that would influence the people’s freedom to decide on their own training. For example, the society can impose a quota system for vocational courses in universities and colleges so that the types of training available for students would be impacted. Lastly, the government can also administer the establishment of public training institutes and persuade firms and employers to supplement their workplace training with government-provided programs and levies (‘Explaining the Differences, p. 24). In like manner, governments can also enforce levies and taxes for those employers who are not committed to training their manpower. In the United Kingdom, the Training Board Levy was introduced in the 1960s. In France, the government imposed the taxes d’apprentissage to help finance some entry-level trainings in the country. In 1971, the French government also established a regulatory system that required all business firms who have more than ten employees to allocate a portion of their salary for funding the Formation Professionally Continue (FOCI). In Australia, the Training Guarantee Scheme was administered to encourage employers to designate higher expenditures for training (Ashton and Green, 1996, p. 3). Moreover, national governments today have been encouraged to develop vocational education and training (VET) systems and procedures that would manage the development of skilled citizens and working people (p. 1). The Vocational Education and Training (VET) System is said to be a significant component of the governmental approach to educational development of the population in many countries (‘Theoretical Approaches’, p. 5). To cite some cases of how VET systems can deliver skilled citizens that can be tapped to organize a competent workforce, the German VET system is typically regarded as a remarkable success. Germany adopts a dual system in vocational education and training wherein the government, employers and trainees play important roles in its implementation. Employers and companies finance two-thirds of the VET funds by funding the on-the-job training; the central and local governments craft the guidelines governing the VET system that obliges employers to fund training and its resources, and finance the vocational colleges; trainees accept low wages in exchange for the training; and the employers, government and trade unions manage the operating procedures. The German VET system has three phases. Training starts at the latter part of schooling wherein all students who leave school at a young age and those who are A-levels engage in apprenticeships, while the rest gets admission at colleges and universities. The second phase consists of the actual training wherein the apprentices would attend vocational college to acquire the theoretical aspect of the training and then be a part of a structured training facilitated by a skilled craftsman for practical enrichment. The training ends when these apprentices master the skills of the apprentice trade which are applicable in the entire German Labour market (Bardwell, Holden and Clay den, 2004, p. 6). According to Designer and Hell wig (2005) the German apprenticeship system is mandatory which requires all young people under 18 years old who are not admitted to higher education, to attend local vocational school on a day release basis. The system also does not promote any specialization since it wants to achieve a broad base of elementary vocational competence that can maximize flexibility of workforce and mobility between work settings (pp. 315,320). On the other hand, Singapore attempted to move into the international arena in the latter part of the 1980s by identifying thirteen industrial clusters that were likely to provide Singapore a competitive advantage. The government realized that the human resources in the country had to be prepared for the global expansion and thus, the government established upgrades in three areas of the education system. The second area was concerned with the production of intermediate technical skills through improvement in vocational education. The Institute of Technical Education was required to admit only those young people who have completed their basic education. ITEM now offers more comprehensive courses with higher skill content which would provide vocational graduates greater chance at polytechnic or university education. The lowest level of National Technical Certificate for employed individuals is equivalent to the standard set for a skilled craftsman. This is done to ensure that the people who would participate in the labor market possess the necessary skills that the contemporary business environment requires and which future competence can be built (Ashton and Sung, 1996, pp. 5-6). Feingold (1991) says that the VET system is a potent means for achieving high skill equilibrium. The VET system elevates the level of general skills of people who are out of the education system, thereby lessening the costs that firms have to incur in training when these people are employed . It also gives firms more funds to allocate and more time to design a job-specific skills training system. Still, it provides an avenue for continuity of the skill formation process as educated individuals are more likely to pursue employment opportunities that can give them more room for skills improvement and innovation making firms achieve good training records and strong workforce base. If most firms have skilled employees who consistently seek further enhancement, the society is guaranteed more productive citizens who can manage societal and economic functions more effectively (pp. 111-112). Ashton and Green (1996) claim that the essence of the VET system is to provide individuals with the opportunity to acquire vocational skills so that they would not enter the workforce and the labor market for that matter, empty-handed. Their base skills would be used by the employers to build on other essential competence and thus, elevate the foundation of skills in the labor force (p. 3). The efforts of the government to regulate capital and labor and improve the educational level of the citizens are all aimed at establishing and maintaining a specified work standard that would guide the operations of the labor market.
Another supplemental process that guarantees skills training and formation is the occupational labor market. The occupational labor market has three key features. First, this model of labor market has established standards relative to the variety of skills and level of attainment of people who are adept in certain occupations. Secondly, the form of training is standardized. Lastly, job descriptions within firms are also standardized. The occupational labor market is a venue for the distribution and transfer of skills. This fact is illustrated in three situations. First, once the standards for the type of skills and level of expertise have been set, employers can look into the pool of workers to determine who meets their needs in the organization. Likewise, workers who want to be employed by a particular firm would be encouraged to pursue more relevant training to meet the standard set by a certain employer that matches his skills. This procedure enables employers to pursue expansion of workforce when necessary without delaying additional training for the current workforce. Second, the set standards give employees flexibility for job movement and changes without losing the skills that they already possess and the pay relative to the job. Lastly, the society benefits from the occupational labor market because it is provided with a better distribution of skilled resources since workers are able to move within the market as the pattern of demand of various firms change (Mars den, 1986, p. 234). The occupational labor market instills significant investment in fundamental aspects of training to help the workers achieve a level of competence that would help them fit into the demands of a skilled occupation. The emphasis on initial training gives societies a pool of manpower equipped with distinct skills that can provide the fundamental base of the existing training system in the community. The initial skills are open for updates and improvements as the workers experience various kinds of job positions in the open market (‘Labor Market Theory, p. 38).
The VET system and occupational labor market are both based on the premise that individuals do not participate in the workforce without skills acquired from previous trainings. Nor is it possible that the turbulent nature of contemporary business environment can solely rely on in-house skills formation processes to deliver highly skilled individuals who can handle the complex nature of work in today’s labor market. People who have completed college or vocational courses and have passed rigid assessment of learning the theoretical components of knowledge can be as competent as those who have undergone rigorous workplace training. However, the volatile and complex market of today requires individuals who can go beyond theories and actual experience to bring about new means of production and new ways of dealing with threats in the work setting. These individuals must be capable of operating technological tools and discovering ways on how to alter the operations of these machines to ensure excellent production. The modern workforce must possess broad base of general knowledge and skills that can only be provided and enhanced by appropriate vocational training and constant practice (‘The Acquisition of Skills, p. 59; Kraal, 2005, p. ).
CONCLUSION
The Firm Internal Labor Market Theory underscores the importance of on-the-job training and other forms of organizational skills formation processes as the primary means of developing a highly skilled workforce. It rests on the notion that when people are working and performing certain tasks, they expose themselves to learning these skills and are therefore guaranteed increased production. However, on-the-job training is not effective for small firms that have few employees as well as for those firms that have not been in operation for a long period of time. These firms are not guaranteed diversity of skills due to few employees or willingness of the people to learn considering the size of the organization and its history. There is fear that the firm would not exist for long thereby putting their job-specific skills into waste. Furthermore, certain contemporary issues such as the extent of state intervention in raising the standards of education and the presence of industries which do not require high skilled manpower influence the effectiveness of JOT. The lower part of the labor market hierarchy includes the manufacturing industry workforce which have repetitive tasks making up killing insignificant. Thus, on-the-job training is not a solution to general human resource or labor market issues. The shortcomings of JOT can be filled by the vocational education and training system of a country and the presence of the occupational labor market. The VET system is a governmental effort to provide vocational skills to those people who cannot pursue higher education so that they would be equipped with fundamental competence when they join the labor force. The occupational labor market on the other hand, sets standards as to the level of skills needed for a certain position. This gives firms and employees the freedom to choose what employment opportunity would benefit them both thereby allowing skills to flow within the occupational market.
In summary, the contemporary business environment is a complex, technical and dynamic one. Thus, the variety of skills needed by modern firms is more complicated. Skills formation, whether it takes places at the workplace or in institutions, should be aimed at producing individuals who can integrate their theoretical expertise with actual practice to come up with novel ways of performing tasks and delivering innovative strategies that can help firms to thrive in today’s turbulent business environment.
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