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

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  • Lake, Henrietta

    (Lake Advisory, London)

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.

Suggested Citation

  • Lake, Henrietta, 2007. "Steering towards the High Road: A Study of Human Resource Management in Two Indian Garment Factories," IZA Discussion Papers 3227, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp3227
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    References listed on IDEAS

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    More about this item

    Keywords

    human resource management; labor productivity; labor standards; India; garments;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J8 - Labor and Demographic Economics - - Labor Standards
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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