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HOME NRI JOURNAL Changing human resource strategies through HR technology in the age of increasing job mobility


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Changing human resource strategies through HR technology in the age of increasing job mobility

Takuma Naito, Principal, Corporate Innovation Consulting Department


HRM strategy

Nov. 28, 2018

As Japan is witnessing a labor shortage due to low birthrate and aging population, many companies are facing the serious personnel issue of increasing employee productivity. Takuma Naito of Nomura Research Institute (NRI) says, “It is necessary to review HR strategies while keeping in mind the increased job mobility in the future”. Going forward, companies must consider how they should go about with Human Resource (HR) management and personnel utilization in the future.


Preparing for unpredictable changes

――Please tell us about the HR issues that companies should focus on.

Issues like countering the labor shortage brought about by low birthrate and aging society and improving productivity have already been talked about adequately. However, apart from these, it is also important to respond to unpredictable changes such as the development of technology with digitization, the rise of new business models and with it the acceleration of both domestic and overseas job mobility, and so on.

For instance, the use of technology in the HR domain (HR tech) is increasing, and many companies that recruit new graduates in bulk are introducing AI (Artificial Intelligence) for tasks like document review in an effort to streamline their operations. Furthermore, it may be necessary to consider using HR tech while keeping in mind the increased job mobility in the future. Some overseas companies are also implementing measures to prevent employee turnover by analyzing HR-related big data and determining the indications and probability of resignation.

――Why is the mobility of human resources increasing?

First of all, we cannot avoid the impact of globalization. If we make inroads overseas, it becomes essential to secure local human resources, but it is common for employees outside Japan to advance their career while changing jobs. Furthermore, it is possible that even foreign companies in Japan may incorporate global standards, keeping in mind the high mobility of the labor market. In fact, a recent subject of wide discussion was the Chinese communication equipment maker HUAWEI recruiting staff in Japan, including new graduates, at an unprecedented initial salary.

In addition, thanks to the advancement of technology, it has become much easier to search for various external resources such as mid-career hires, freelancers, outsourcers, and so on. Using information from social networking sites, it has become possible to scout for talent and recruit people who are compatible with the company’s corporate culture, and do so accurately.

External procurement costs and internal training costs of human resources are reversed

――In that case, the traditional HR management model of hiring new graduates in bulk, training them, and having them work with the company over a long period of time will be forced to change, isn’t that so?

Actually, with the increase in resource mobility, the cost of procuring the right personnel from outside will decrease, but internal training costs will rise due to the decreasing retention rate. In other words, after a point, the cost-effectiveness of external procurement and internal training will be reversed.

Labor market mobility and resource procurement cost

――What problems would arise as a result?

For instance, if only 1 out of 10 people who were trained continues with the company, how are we to think of the training investment of the remaining 9 people who left? Should we reconsider the recruitment and training policies as being too wasteful, or should we consider that it was worth it if they delivered results commensurate with the training investment and contributed to the growth of the business while they were with the company?
On the other hand, if procurement costs are low and we put together a perfect team from the perspective of skills but consisting only of external resources, it does not guarantee that the team will work well within the company. The difficulty of HR management is that it cannot be accomplished well by looking at only economic rationality and skill compatibility.

However, the rate of labor mobility differs from industry to industry. It is already quite high in industries like pharmaceutical, finance (corporate wholesale divisions), and IT, where the costs are inverted, but there still exist industries where the internal training costs are lower. In such industries, it may be difficult to recognize the benefits of dynamically securing external talent, but the wave of mobility is sure to arrive sooner or later.

Urgent need to shift to a globally tailored HR management

――What changes are required of companies?

It may sound clichéd, but “treating people according to their ability and achievements, and not their age or attributes,” is the foundation for recruiting resources with high potential and increasing their added value. It is necessary to not treat people according to their seniority or ability, but to change to "a pay scheme that depends on the global standards of magnitude of duties and roles". This can be done by developing a system that can procure people who meet the necessary human resources specifications from within and outside the company in a timely manner, making maximum use of personnel data and biometric data to grasp the situation of organizations and human resources, and developing necessary measures.

The more stubbornly one adheres to the current personnel system, the more difficult it will be to make such a change, but it is essential for the management and HR departments to face the reality and work on it. For example, human resources who are exposed to diverse global management styles or ways of thinking (such as through overseas subsidiaries) can understand the necessity of change and put it into practice. Increasing the number of such resources is the first step in making this change. Furthermore, if HR technologies that greatly improve workstyles are combined well, it should be possible to maintain or improve the value added by companies and personnel, and strengthen the business’ competitiveness. We also would like to provide support in reviewing traditional models and “creating a new relationship between companies and human resources”.

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