Steering towards the High Road: A Study of Human Resource Management in Two Indian Garment Factories

Henrietta Lake ()
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Henrietta Lake: Lake Advisory, London

No 3227, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: What are the performance benefits of investing in human resources in a low-cost labor environment where returns to such investment are widely perceived as negligible? This paper presents a matched pair case study on the performance effect of human resource management systems at two garment factories manufacturing for export in India. They make the same product for the same buyer with the same local pool of labor. One factory views its workforce as a variable cost to be minimized, limits training, prefers strict hierarchy and job definitions. It relies on a range of factors including the offer of overtime and a lack of available alternatives to workers for retention. The other factory, which is located almost next door and pays the same basic wage, focuses on skills development, opportunities for promotion and encouraging employee participation. Employee turnover at the first factory is almost three times greater than that of the second, its absenteeism one third higher, while its product quality is 2.6 times lower and its production efficiency over 28 percent lower. This study demonstrates that even in a low-wage environment, HRM and work organization have a tangible and independent impact on performance.

Keywords: human resource management; labor productivity; labor standards; India; garments (search for similar items in EconPapers)
JEL-codes: J24 J8 O15 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2007-12
New Economics Papers: this item is included in nep-cwa, nep-hrm and nep-lab
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