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Second Interim Report
Clair Brown, Editor

2. Innovative Human Resource Policies and Work Practices
Vincent M. Valvano

2.1 Introduction
2.2 Distribution of Work Practices Across Fabs
2.3 Distribution of Compensation Policies Across Fabs
2.4 Policy and Practice Comparisons Across Fab Categories
2. 5Policies and Practices Across Occupational Categories
2.6 Summary

2.1 Introduction

A variety of factors may influence the set of human resource (HR) practices adopted by a wafer fab. Fab managers may have more or less autonomy to implement human resource policies, depending on the degree to which such policies are set at the corporate level. Casual observation at the fabs we have visited suggests that fab managers in the United States have relatively more autonomy in this respect than their counterparts in Asia, where a range of policies concerning training, work organization and employment security are set at the corporate level. In the U.S., with a few notable exceptions, only compensation policy is generally a corporate-level management prerogative, while significant control over the implementation of particular work practices resides with fab-level management.

Characteristics of the major process and product technologies in place at a fab may also influence HR practices. Seven of the 15 fabs in the Human Resources subsample are primarily or exclusively logic fabs, 5 are memory fabs and 3 fabs produce older bipolar / analog products. (Two of the logic fabs also produce memory chips.) In general, production volume for a given product is higher in memory fabs than in logic fabs. Logic fabs are likely to have more active die types in production at any particular time, and hence smaller average volumes for particular products compared to memory fabs. Consequently, equipment settings are reprogrammed and photo masks are generally changed more frequently in logic fabs, and more tests are carried out for a given level of production, relative to memory fabs. This level of "customized" production that is typical of logic fabs affects their performance. In the full CSM sample, memory fabs tend to outperform logic fabs in most performance metrics, including yield, labor productivity, and stepper throughput, at least in part due to simple economies of scale. A preliminary comparison of human resource policies and practices at memory and logic fabs is presented here.

Participating fabs were asked about current practice and future intentions with respect to a range of innovative human resource policies and practices. Our goal was to get a general indication of which practices have been widely adopted in the industry and which have not, as well as a record of the timing of adoption. We presented a set of innovative human resource policies and asked fab management if such policies were currently in place, had been previously attempted and abandoned, or were planned for future adoption. (Table 2-1 defines the policies and practices.) Because some of these policies apply to a specific occupational category and others could, in practice, be applied selectively across occupations, we asked respondents to identify practices in place for each of the principal occupations in the fabCoperators, technicians, and engineers. Subsequent questions in the Human Resources Questionnaire examine the intensity of specific practices such as training and employee participation in teams. Eventually, as our sample of fabs increases, we hope to be able to assess the relationship between fab HR policies and performance.

Recent research on firm adoption of innovative HR policies has focused on the extent to which particular policies are complimentary and might be expected to be adopted in bundles. For example, a policy of employment security might be implemented in tandem with policies of cross-training, continuous improvement, and knowledge pay. As Figures 2-1, 2-2, and 2-3 indicate, innovative training policies are in place at nearly all of the fabs in our sample. Employment security, job rotation, and quality improvement teams are also widely diffused policies. However, various types of compensation policies are more selectively applied by particular fabs (Table 2-2). Only at several Asian fabs in the sample were policies of training, job rotation, and employment security implemented in a way that suggested management recognized and was trying to capture the benefits from potential complimentarities between these policies.

Given that the fabs in our sample are spread across three continents, it is likely that national labor market institutions and policies affect the set of HR practices in place at particular fabs. We will focus on a comparison of Asian and U.S. fab human resource policies, given that 12 of 15 sample fabs are located in one of these two regions. In our sample, there is also an overlap between fab location and technology. Four of the five memory fabs in our sample are in Asia. The logic fabs are geographically diverse. Accordingly, it may be difficult to separately identify the effects of location and technology across our sample fabs. For example, most of the memory fabs have a complex pay system in place for production workers (as well as for engineers) that includes base hourly pay and bonus pay, rather than the straight hourly pay that is typical for other fabs. This policy is best viewed as generated by particular national labor market institutions rather than as a decision made by management at the firm or fab level.

2.2 Distribution of Work Practices Across Fabs

Figures 2-1, 2-2, and 2-3 report the distribution of work practices across fabs for each occupation. Clearly, some practices are widely diffused across the fabs in our sample and others are not. Innovative training policies are in place at all fabs. Financial support for off-site training and course work (such as tuition reimbursement and paid time off) is policy at every fab, and covers operators as well as technicians and engineers. Operators at nearly all fabs are cross-trained on more than one equipment type within their assigned bay. In addition, most of the sample fabs report cross-training operators on equipment types in more than one equipment bay. Technicians and engineers commonly participate in on-the-job training of operators, and engineers contribute to the training of technicians in nearly all fabs. (Chapter 6 discusses training intensity across the sample fabs.)

The use of problem-solving teams is also a prevalent practice among the fabs surveyed. We distinguish between cross-functional teams, which contain members from multiple work areas or functions, and quality improvement teams or circles, which are organized by area. Both are widely adopted across fabs, although not necessarily within fabs (see Chapter 7). Self-directed work teams are somewhat less widespread than the other types of teams. However, several fabs plan to introduce such teams in the future, suggesting that self-directed work teams will soon become as prevalent as quality improvement teams are currently. Our case studies also suggest that self-directed work teams, once established, do not displace other types of teams operating in the fab. The relationship between types of teams appears to be one of complimentarity rather than substitutability. Seven of the fabs in our sample have active teams of all three types and two more fabs are planning to add self-directed work teams to their rosters of quality improvement and cross-functional teams.

Teams are a mechanism to solve complex problems which are difficult for individual operators, technicians, or engineers to respond to individually, in the context of their day-to-day responsibilities. Teams facilitate information sharing and learning among employees and allow groups of employees to focus intently on particular problems in a structured environment. But it is also possible for learning and problem solving to be incorporated into the range of activities employees accomplish on the job without the presence of teams. For example, the experience of one fab in our sample suggests an alternate model for accomplishing the problem-solving activity that teams are intended to foster. This fab set up and subsequently dismantled two types of teamsCquality circles and self-directed work teamsCafter a number of years. When we visited this fab in 1993, it had recently established Total Preventative Maintenance (TPM) activity circles among its operators. But a high level of problem-solving activity was incorporated into the routine of employees without relying on a large team infrastructure. The fab trained certain operators intensively in statistical process control (SPC) techniques or equipment maintenance and subsequently expected them to train other operators continuously, as part of their job descriptions. For example, some operators were selected to join the Equipment Engineering staff for a three to twelve month period of training, after which they would perform equipment maintenance, disassembly, and trouble-shooting. In addition they became responsible for on-the-job training of other operators in routine maintenance procedures. Because the operator work force was sufficiently trained in equipment maintenance, there was no equipment maintenance technician job category in this fab. In similar fashion, operator group leaders were trained intensively in SPC theory and techniques by the Quality Assurance Department. The group leaders were responsible for providing SPC training to the operators under their purview. The multi-leveled and near continuous nature of training in the fab appeared to induce the formation of spontaneous informal teams. One supervisor reported that when a particular problem arises, he encourages four or five operators to join together to determine the source of the problem. Hence, group problem-solving activity is still important in this fab, but the high skill levels of operators allow such activity to be carried out in a less structured manner than is typical of problem-solving teams. In effect, intensive work force training can make formal team structures at least partially unnecessary.

2.3 Distribution of Compensation Policies Across Fabs

Table 2-2 presents the distribution of innovative compensation policies across the fabs in our sample. We indicate whether a particular policy is in place for all principal occupations in a fab or some subset of those occupations. The two most prevalent policies in place at fabs are profit-sharing plans and employee stock ownership plans (ESOPs). With one exception, these policies apply to all occupations in the sample fabs. Also widespread are non-monetary incentives, suggestion pay and knowledge pay. However, these three policies are somewhat more likely to be applied selectively to certain occupational groups. Team and individual incentive pay policies are rarely in place for all occupations in a given fab. But about half of the sample fabs have individual incentive pay for one or two occupations.

2.4 Policy and Practice Comparisons Across Fab Categories: Memory vs. Logic Fabs and Asian vs. U.S. Fabs

To get some indication of whether the policies in place at sample fabs differ according to process/product technology or location, core policies were identified for each of four fab categoriesCmemory, logic, Asian, and U.S. A policy was considered core if it was widely diffused across the fabs in a category, i.e. if more than two-thirds of the fabs had such a policy in place or were planning to implement it. Table 2-3 presents the core practices of fabs in each category. All fabs, regardless of category, have the same broad set of policies in place for operator training, though this does not imply that actual training levels are similar across fabs (see Chapter 6). Differences between categories are nearly identical across the two comparison groups (memory-logic, Asian-U.S.) for team structure, compensation policy and work organization. Since most memory fabs in our sample are Asian fabs, and conversely, most Asian fabs are memory fabs, the one-to-one correspondence of core policies in the two categories is not surprising. (Only half of U.S. fabs are logic fabs, and conversely.) Unfortunately, such correspondence makes it difficult to identify systematic differences across comparison groups. And inadequate sample sizes at present do not permit comparisons that might be more informative, such as comparing U.S. logic (memory) fabs and Asian logic (memory) fabs.

The group comparisons produce a number of interesting results. U.S. fabs are more likely to have in place a variety of team structures (cross-functional, self-directed work teams, and quality improvement). Asian fabs tend to restrict their teams to quality improvement efforts. Our site visits give no indication that more teams are necessarily better. In fact, U.S. fabs tend to have a shorter track record with team organization and accordingly may be trying to learn what types of teams work best.

Asian fabs use a wider range of compensation policies than U.S. fabs. Suggestion and knowledge pay and non-monetary incentives are more widespread in Asian fabs.

Shift rotation for operators is widespread in Asia but not the U.S. Job rotation for engineers is also the more prevalent in Asian fabs. In U.S. fabs, job rotation for operators is not a core practice, unlike in the Asian fabs.

2.5 Policies and Practices Across Occupational Categories

There is some evidence that policies that were once applied exclusively to one occupation are now more widely diffused across occupations in the fab. For example, knowledge pay is nearly as prevalent for operators as for engineers in our sample of fabs. Team incentives, although not a widespread practice, are more common for engineers than for operators or technicians. However, a number of fabs have now begun to extend this policy to technicians. Shift work schedules, once a policy applied principally to operators and technicians, are becoming more common for engineers as well (although not each shift is necessarily fully staffed). About half of the fabs in our sample now also put engineers on regular night and weekend assignments.

2.6 Summary

1. 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.

2. U.S. fabs are more likely to use a variety of team structures (cross-functional, self-directed work teams, and quality improvement). Asian fabs tend to restrict their teams to quality improvement efforts. Our site visits give 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. U.S. fabs tend to have a shorter track record with team organization and may be trying to learn what types of teams work best.

3. Asian fabs use a wider range of compensation policies than U.S. fabs. Suggestion and knowledge pay policies are more prevalent in Asian fabs.

4. Work organization differs significantly across Asian and U.S. fabs. Shift rotation for operators is widespread in Asia but not the U.S. Job rotation for engineers is also the norm in Asian fabs. Moreover, in U.S. fabs, operator job rotation is not a common practice, unlike in the Asian fabs.

End of Chapter 2

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