1. Executive Summary
Clair Brown

1.1 Introduction

This is the second interim report covering the research activities of the Competitive Semiconductor Manufacturing Human Resources (CSM-HR) project, which began July 1993 as an adjunct to the CSM multi-year research program, which studies competitive semiconductor manufacturing worldwide.

The CSM-HR project has three research activities:

• Analysis of the data previously collected on fifteen fabs by the main study;

• Development, collection, and analysis of a supplemental mail-out HR questionnaire to participating fabs about their employment (i.e., human resources) and training systems;

• Analysis of key questions, or focus studies, on how the HR systems function. These case studies augment the more general analysis covering all the fabs.
  

This second interim report is divided into two parts. The first part presents the preliminary results from the HR questionnaire. This section begins with an overview of workplace practices (Chapter 1) before presenting the findings from the fifteen fabs that returned the HR questionnaire (Chapters 2 through 7). The second part presents the focus studies, including preliminary results from on-going focus studies on the transferability of practices (Chapter 8), on the evolution of skills and careers at one major U.S. company (Chapter 9), on inter-firm knowledge sharing (Chapter 10), and on managing creativity and control in innovation (Chapter 11), as well as completed focus studies on human capital investment in learning-by-doing (Chapter 12), on team organization and process (Chapter 13), and on a statistical analysis of the initial interview data and a comparison of these data with a subset of responses to the HR questionnaire (Chapter 14).

The CSM-HR group is led by Prof. Clair Brown and includes Prof. Michael Reich and graduate students Melissa Appleyard, Jumbi Edulbehram (who is currently on leave), Dan Rascher (who joined us this year), and Vince Valvano. Past members have included postdoctoral fellow David Bowen, and Adjunct Professor Vinay Sohoni, to whom this report is dedicated. We have been very fortunate to have collaborated in the past with graduate students Diane Bailey, Nile Hatch, Baruch Saeed, and Linda Sattler from the CSM main study.

1.2 The Questionnaire and Preliminary Conclusions

In order to analyze how the component parts of an HR system work and the relationship of the HR system (rather than individual parts) to firm performance, a detailed questionnaire of the HR system was developed and mailed to participating fabs. The questionnaire covered the main components of the human resource system:

• Hiring and lay offs (quantity);

• Internal allocation of labor (job assignment, promotion, shift);

• Work organization (work process, teams, functional divisions);

• Training and skill development (quality);

• Compensation and evaluation;

• Division of tasks (across occupations) and career ladders.

We have collected and analyzed the results from fifteen fabs on three continents.

Our preliminary results confirm the main conclusion reported in the first CSM-HR report:

High performing fabs will have a human resource system with integrated, consistent parts and the system will be tailored to function in a specific environment.

We find that successful systems not only include a seamless interplay of internal resources, but also encourage the identification and incorporation of appropriate external knowledge and know-how. The effectiveness of any particular system will depend on its environment--the product market, the economic conditions, and the institutional and cultural system in which the company operates.

The relationship of a particular practice to firm performance must not be studied in isolation because how a particular practice functions within the HR system as a whole determines the relationship. For this reason, the CSM-HR study starts with the premise that "best practice" can take more than one path. One set of "best practices" does not necessarily exist for all environments. In fact, more than one HR system may perform well in any particular set of circumstances, since trade-offs may exist between the component parts of a system. However, not all HR systems are internally consistent, and not all HR systems function equally well. In the former case, firms may inadvertently create "hybrids" that use incompatible components and result in unintended consequences. In the latter case, some HR systems may not adapt adequately or rapidly enough to changes in the environment or management may attempt to import one innovation in HR practices without ensuring that other changes are made to keep the system integrated and consistent.

The research goal of the second CSM-HR report is to document and analyze the individual components of the employment system and examine how they function together in order to identify prototypes of HR systems. In our final report (winter 1997), the CSM-HR project will also examine how an HR system functions within a given environment and will measure the relative effectiveness of the prototype systems in terms of firm performance.

1.3 The HR Questionnaire

Our earlier analysis of the interview data found some intriguing results, which we compare to our findings from the HR questionnaire. However, we did not know how representative these employee responses were and to what extent their personal experience could be used to document the HR system, since the data represent a few non-randomly chosen employees (operators, technicians, supervisors, and engineers). Also, these data were not collected as a systematic documentation of the HR system, and therefore they did not necessarily provide information on the systematic linkages among the parts of the HR (or employment) system of the firm. We used these preliminary results as a guide in developing a more systematic and comprehensive questionnaire on employment and training practices.

Because of the rich set of performance metrics available, whenever possible the authors have paid attention to how practices affect particular outcomes (e.g., defect density, line yield, cycle time, labor productivity), and these are presented in the findings. However, we have relied on the knowledge and insights gained through our fieldwork as well as on statistical significance in presenting our findings. In this summary, patterns observed at the high performing fabs are highlighted.

1.4 Innovative Human Resource Policies

Systematic differences in practices exist across fabs when they are grouped according to their major process flows (memory or logic) or according to region (Asia or the U.S.). Because most of the memory fabs in our sample are in Asia (4 of 5 fabs), it is not easy to distinguish between region-practice and process-practice correlations. For this reason, observed differences cannot always be exclusively related to the institutional structure or to the product type, since both of the attributes are important in defining the environment.

Logic (and U.S.) fabs are more likely to use a variety of team structures (cross-functional, self-directed work teams, and quality improvement). Memory (and Asian) fabs tend to restrict their teams to quality improvement efforts. Our site visits gave no indication that the number or variety of teams in place at a fab is positively related to the amount and quality of problem-solving activity. American fabs tend to have a shorter track record with team organization and may be trying to learn what types of teams work best. Asian fabs use a wider range of compensation policies than U.S. fabs for production workers, and suggestion and knowledge pay policies are more prevalent.

Work organization differs significantly across fabs by region. Shift rotation for operators is widespread in Asia. Job rotation for engineers is also the norm in Asian fabs. In U.S. fabs, operator job rotation is not a common practice.

1.5 Employment and Turnover

Between 1990-1994, employment levels were more stable in the U.S. than in the Asian fabs. The Asian fabs had more turnover (mostly quits) than the U.S. fabs. This reflects the use of female operators who leave the work force early to start families as well as the local competition for workers. One example of an unstable work situation comes from one fab that is trying to decrease its headcount by 40% while it doubles its productivity.

Asian fabs have more workers of all types than U.S. fabs in our sample. In general, memory fabs have more operators but fewer engineers than logic fabs. There is a higher ratio of equipment to process technicians than equipment to process engineers because of the cleaning and maintenance activities performed by technicians. On the other hand, engineers are the primary workers involved in process design, implementation, and testing.

Logic chip manufacturing uses more engineers, supervisors, and managers per operator and technician than memory chip production. In the U.S., logic producers use fewer engineers than Asian logic manufacturers per employee.

A higher number of operators per supervisor is associated with lower performances in defect density and direct labor productivity. A high ratio of operators per engineer is correlated with higher defect densities and higher stepper throughput.

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