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Second Interim Report

1. Executive Summary
Clair Brown

1.6 Employee Experience, Pay, and Career Ladders

There is significant variation in employee experience levels in our sample of semiconductor fabs. One-third of our sample fabs had a majority of operators with at least five years of tenure. At several fabs, however, a majority of operators had less than two years of tenure. Operator work forces with a female majority are common in semiconductor fabs and predominate in our sample. The engineering work forces in our sample had higher levels of fab tenure than operators. Most fabs reported that a majority of their engineers had at least five years of tenure.

We find a significant degree of wage-level dispersion across our sample fabs. This is expected given that the sample fabs span seven countries and three continents. Most fabs in our sample reported operator career ladders with four grades and fairly flat wage paths across grades. Career ladders for technicians exhibit more steepness than those for operators. Engineer career ladders are longer and the wage paths more steeply sloped, relative to those for operators and technicians.

In our sample, we do not observe a positive relation between work force experience and wage path steepness, as might be expected if a principal goal of career ladders is to encourage skill development and retain experienced employees.

Job assignments may or may not translate into job ladders. This relationship depends on the use of job assignment to achieve skill acquisition (i.e., learning a new task and multi-skilling) or achieve skill deepening (i.e., learning how to solve problems or make repairs) or reward workers with a preferred assignment. Job assignment may be used by management as a strategy for developing skills, or job assignment may be used by employees to improve their own working conditions. Similarly, job rotation may or may not be part of a system of multi-skilling and flexibility; instead, it may be part of a system of job control to relieve monotony or to decrease injuries. In the high performing fabs, we observed that job assignments were an integral part of the training process and were used to broaden and deepen skills as well as to reward for good performance.

1.7 Appraisal and Promotion

We asked the fabs to rank the following criteria in order of importance for promotion: Attendance, Attitude, Output or Work Goals, Quality Record, Skill Level, Number of Skills, Team Participation, and Tenure. Given the technical complexity of each step of the semiconductor process flow and the need to understand these complexities for effective trouble-shooting, the data show that fabs value skill depth more highly than skill breadth. Of the eight appraisal criteria, the fabrication plants in our sample ranked Skill Level at the top for all job categories--engineers, operators, and technicians. Number of Skills, our proxy for skill breadth, ranked no higher than fifth.

Of the appraisal criteria, Tenure ranked last. Less than half the fabs in our sample even consider Tenure in promotion decisions. However, tenure and skill development are often closely related for operators and technicians. Promotion based upon skill would result in similar outcomes to promotion based upon tenure, with some exceptions at the high and low ends of performance and ability.

Few operators and technicians are ever promoted to other job categories. Only three fabs reported promoting more than ten operators a year to group leader, supervisor, or technician. No fab reported promoting more than four technicians to a supervisor or engineer position. The limited number of promotions of operators and technicians outside of their job categories indicates that barriers exist. During site visits, we found that the primary barrier is additional schooling.

Another reason why few operators are promoted to the technician job category is cultural. A few fabs in our sample have barriers along gender lines: women are operators and men are technicians or engineers. A final reason for the limited mobility of hourly workers is a monetary reward issue. Some operators and technicians whom we met during our site visits said that they were reluctant to relinquish the ability to earn overtime pay for a salaried position.

1.8 Training

In the First Interim Report on Human Resources, we found that the practice of relying on prior experience was not an effective method of obtaining skilled operators and technicians. This implied that much of the important learning for operators and technicians occurs on-the-job in a particular fab environment.

The average number of days of initial training is similar across job categories, ranging from 21 to 27 days. The number of days of initial training is positively correlated with performance for all three job categories.

About 40% of each worker's time is spent in on-the-job training during the first year of employment across all three job categories, with an additional 5-8% of their time spent in the classroom. No significant correlations were found between this training and performance. After the first year, approximately 15% of each worker’s time is spent in on-the-job training, with an additional 6-10% spent in the classroom. Again, no significant correlations were found between the amount of training after the first year and the performance metrics.

The results show that the type of training and the method is delivered are important, rather than the time in training. It appears that using OJT training alone isn't useful with respect to increasing performance. For operators and engineers, using only classroom training hinders the goal of high performance. Technicians respond positively to solely classroom training. There is a positive correlation between the use of both types of training and the performance metrics across all job categories.

1.9 Skills and Work Tasks

Rapid and thorough problem-solving is a critical activity in the semiconductor industry. The initial data collection allowed us to draw preliminary conclusions about the relationship between HR practices and performance:

· Superior performance is associated with high technical content in operators' job responsibilities. To more thoroughly investigate this relation, our new questionnaire explores the distribution of equipment maintenance and SPC responsibilities among operators, technicians, and engineers.

· Many engineers thought that they should be devoting their time to long-term, yield improvement projects rather than "fire-fighting" on the production line. Our data show, however, that engineering involvement in sustaining the production line correlates with high fab performance. We are studying to what degree techs and operators can substitute for engineers when problems occur.

Examination of the participation of operators, technicians and engineers in equipment maintenance and statistical process control (SPC) activities indicates that these findings are partially substantiated. Teamwork is commonplace in the majority of fabs in our sample, and teams at different fabs share many characteristics. The organization of work tasks and the participation of workers in specific activities seem to have a bigger impact on performance than the characteristics of teams.

Equipment maintenance and statistical process control (SPC) activities exhibit a greater degree of variation in human resources practices across the fifteen fabs than does participation in teams. Both equipment maintenance and SPC are central to effective problem-solving in a fab. The correlations for SPC activities and performance support the hypothesis that fabs that engage in technical tasks most intensively should exhibit the highest performance. The involvement of operators in equipment maintenance activities is positively correlated to performance; however, the involvement of technicians and engineers is not. So the earlier finding that fabs that involve their operators in equipment maintenance achieve a higher level of performance is supported. A fab's need to solve problems quickly and permanently requires operators and technicians to identify problems immediately and then work with engineers to uncover root causes and implement lasting solutions. We will continue to document how this process is most effectively achieved.

1.10 Summary of Findings and Job Prospects

The semiconductor industry provides a lot of training across all occupations, from operators to engineers. This training is necessary because workers are involved in continuous problem-solving in an industry that is continually introducing new processes or new products and is continually automating. After an average of a month of initial training, workers are receiving training about half the work time during the first year with the bulk of the training on the job. In subsequent years, about one-quarter of the time is spent in training (Table 1-1).

Training of technicians is more likely to be correlated with the performance metrics than training of operators and engineers. We believe that this reflects the importance of machine up-time in determining machine productivity and the large variation in actual machine up-time observed across fabs. Fabs also exhibited large variations in the involvement of employees in equipment maintenance activities (Figure 1-1).

Operators are involved in fairly high skilled procedures, including various types of SPC (Figure 1-2) and equipment maintenance activities. Compared to operators in traditional manufacturing jobs, the operators in semiconductors oversee a highly technical process and undertake relatively complex technical tasks. Most operators are involved in data collection and monitoring, but the level of operator involvement declines as the difficulty of the task increases. The level of operator involvement in problem solving is usually limited to identifying the nature of the problem and notifying technicians or engineers. In a few fabs, operators are involved in performing some routine maintenance. Overall, operators perform tasks that require training and skill development. However, operators are still limited in their skill development and career growth, as well as wage growth, unless they become techs.

Two examples of career ladders for operator/technicians are shown in Table 1-2. All production workers in the large Japanese semiconductor companies are on a career ladder that combines operator and technician tasks, training and skills. By age 40, Japanese electronics workers have technical skills and job tasks. In the U.S., the operator jobs are usually separated from the technician jobs , and an operator does not necessarily (or usually) become a technician. However, most fabs provide the opportunity for an operator to move up to a technician job. To do this, the operator typically must return to school to earn an AA degree in electronics, since fewer than 10% of operators have AA degrees. They also must take some home study courses as well as undertake specific company-provided training (including on-the-job training in certain processes). The requirements are rigorous and require a lot of nonpaid time and commitment. At the U.S. company shown in the example, which encourages internal promotion, only one-third of the operators become technicians and one-half of the technicians were promoted from operator. For those operators who do become technicians at this U.S. company, their career ladders looks like the Japanese career ladder, which takes about 20 plus years and includes wages increasing 3.6 times.

Korean fabs provide an interesting contrast to both the Japanese and U.S. cases, since operator jobs are strictly segmented from technician jobs. Women, who live and work at the company for only three to five years before quitting to get married, are operators; men, who usually have long careers with the company, are technicians (as well as engineers and managers).

Hourly earnings in the semiconductor industry have increased as the importance of technicians has increased (Figure 1-3). However, average earnings ($14.50 in 1994) are still low compared to UAW production and craft workers, who earned $18.28 and $21.44, respectively, in the Big Three automobile companies in 1994.

American companies increased employment in the U.S. relative to employment offshore since 1991, so that U.S. employment exceeded offshore employment in 1994 (SIA Annual Databook: 1995, Semiconductor Industry Association). Overall, the outlook for employment, especially technicians and engineers, is strong even in the presence of continual automation. Although there is the potential for long career ladders for non-college graduates, the upgrading requires a technical education pursued outside of work as well as work-based training. The semiconductor industry pays relatively lower wages than unionized manufacturing but above average wages for all manufacturing, which has lower skill requirements.

1.11 Focus Studies

Analysis of key questions are presented in the seven focus studies.

  • In "The Transferability of Case Study Findings to Other Firms," Rascher and Brown address the problem of how to know if "best practices" can be transferred from one fab to another. They present a table that highlights which practices are necessary or sufficient for successful transfer.

  • In "The Evolution of Skill Demand and the Nature of the Employment Relationship in a Technology-Intensive Firm," Valvano looks at the dynamics of career and pay patterns of managers and professionals in one U.S. company over a 19-year period. He finds that the occupational distribution of employment shifted towards higher-skill professionals beginning in the mid-1980s. Real mean earnings over the period 1976-1994 are relatively stable, and there is little evidence of adjustment of earnings levels to labor market or product market shocks.

  • In "How Does Knowledge Flow? Inter-Firm Patterns in the Semiconductor Industry," Appleyard shows that Japanese engineers rely more upon public sources(e.g., conference presentations and journals) for technical information and U.S. engineers rely more upon private sources (e.g., customers and personal contacts at other companies). She discusses the formulation of optimal strategies of interfirm knowledge sharing given the characteristics of the semiconductor industry.

  • In "Managing Creativity and Control in Innovation," Brown analyzes the management of the development and transfer of a new process or product. She discusses how work organization, incentive systems, and communication systems affect the creation, sharing, and control of knowledge.

  • In "Enhancing the Rate of Learning by Doing through Human Resource Management," Hatch demonstrates that investments in human capital, which transform laborers into problem solvers, increase the level of learning by doing.
    · In "A Systems View of Work Group Performance: An Example from Semiconductor Manufacturing," Bowen constructs a model of group performance that analyzes the contribution of the knowledge, skills, and abilities of work group members to performance and identifies which elements of the work system inhibit performance improvement.

  • In "Statistical Tools for Industry Data," Sattler uses multidimensional scaling and principal components analysis to analyze the patterns and to present "overall picture" graphs of the high performers and low performers in the first wave of case study data. She also compares these data to a subset of the data from the HR questionnaire.


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