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Bayer AG, a chemical and pharmaceutical company, was founded in 1863 by Friedrich Bayer and John Friedrich Weskott. Bayer’s headquarter is located in Leverkusen, Morth Rhine – Westphalia, Germany and they are well known for its originality in their brand of aspirin globally. Till date, Bayer has 290 subsidiaries in 73 countries throughout the world and corporate are located in close proximity to their customers and market worldwide.
Bayer is an organization that deals with core competencies in the areas of health care, agriculture and high – tech polymer materials where their primary areas of business consists of human and veterinary pharmaceuticals, consumer healthcare products, agricultural chemicals and biotechnology products and high value of polymers. (AG 2014)
Bayer Healthcare, Bayer Cropscience and Bayer Materialscience were established to target the respective sectors of healthcare, agriculture and high – tech polymers in the market. The holding company and subgroups are supported in their activities by three service companies Bayer Business Services, Bayer Technology Services and Currenta.
The mission of Bayer is “Bayer: Science for a better life”. It speaks of scientific successes aim to improve people’s quality of life and at the same time form the foundation for business sustainability and profitability. Their values is revolves around the word LIFE which represents Leadership, Integrity, Flexibility and Efficiency in guiding them to fulfill their mission statement. (AG 2014)
Signaling is the idea whereby one party credibly conveys information about itself to another intended party. (Brewer and McEwan 2010) In firm’s perspective, they often face the difficulties of choosing suitable individuals out of the pool of applicants with different levels of skill. It is difficult and costly for firm to evaluate every job applicant to show their competency to them. Hence, signaling plays an important role in helping firms to differentiate potential candidates and not underestimating or overestimating individual’s talent and ability in job screening process.
Likewise, employees could also send signals to their employer as they act as ‘sellers’ of their human capital so that employer are willing to give them employment opportunities or high wages for better worker with outstanding performance and productivity in the company overtime.
It allows employers to sort talent out of the pool of candidates appropriately in assigning them position they are capable or potential doing the required job. Asymmetric information are often presented during recruitment, company have to screen using signaling approaches to aiding the accuracy of screening process. (Lazear and Gibbs 2009)
There are a number of economic literature reviews that can discuss a few approaches that companies could actually examine and consider the few possible approaches in enhancing or implement in their existing signaling approaches.
Firstly, the quality of human capital is crucial for companies to maintain their competitive advantage but companies are facing and suffering from high turnover rates making them hard to neither retain nor recruit the potential employees. Hence, there is a need to develop personnel selection mechanism in finding suitable employees for companies. A data mining framework based on decision tree and association rules to generate useful rules for personnel selection. Results for data mining framework could provide employer with decision rules relating to personnel information in regards to their work performance and retention. Studies have shown and support that employers hiring decision for indirect labors including engineers and managers with different job scopes or function. (Chien and Chen 2008)
Secondly, in labor market, it is often the case that employee’s lifetime, information about their ability is gradually revealed in a company they are committing. However, information about an employee’s ability is only directly revealed to the employing company however other companies use employee’s job assignment as a signal of ability. Therefore, wage rates tend to be closely related with jobs than with ability levels, frequent inefficient assignment of employee to job and severity of inefficiency tends to be negatively correlated with the level of firm specific human capital. Thus, other companies are usually at informational disadvantage when it comes to experience workers, but somewhat reduce by the fact companies can use individual’s job assignment as an imprecise signal of individual ability. (Waldman 1984)
Thirdly, higher levels of education and more work experience tend to have higher wages are commonly linked to time spent in school or job increase the wage by directly increasing employee’s productivity. It is unlikely to explain that most wage differential are associated with schooling and work history. Higher educated employees elicits lower quitting or absenteeism rate as compared to lower educated employees. Employer can take education into account when hiring worker as a means of hiring worker with lower absenteeism and job turnover rate hence, demanding a minimum education level in part of job requirement. In turn, employees can use duration of schooling to signal their ability to potential employers of their ability and take them into consideration pool. (Weiss 1995)
Fourthly, employees work due to the incentives they receive at the end of their working outcome. Workers are heterogeneous in their intrinsic motivation to work in a company. Optimal incentive schemes allow the firm to attract and select highly motivated workers to fill in the vacancies available in the company. Posting of higher wage rates increase the probability of filling the vacancies faster with more applicants trying to apply for the job or position to get higher work wage. Moreover, it decreases the expected average quality of job applicants as less motivated workers would apply for the job. Optimal wage scheme involves a tradeoff between the probabilities of filling the vacancy; rent left to the worker and expected worker’s motivation in workplace. (Delfgaauw 2007)
Bayer pursue after a sustainable human resource policy revolving around the acronym LIFE, Leadership, Integrity, Flexibility and Efficiency values in their employees. These values enclose the company culture combining with a strong focus on performance and development of high degree of social responsibility which at the same time made it practical and simple for the employees in their work. They believe in systematic people development is important in future success of the company. The fundamental principle is that every employee has his or her own individual strengths and talents that deserve recognition and development in the workplace. (AG, Annual Report 2014)
Vacancies in Bayer from non-managerial to senior management level are advertised via a globally accessible platform. They believe regular feedback system is necessary for the continuous development of their employees and organization and that it helps them to adapt to changing requirements. Group-wide employee survey is their feedback tool at the corporate level is. Survey is held every two year to monitor the employees and receiving competent feedback the strategy, culture and working conditions. Shortcomings are identified in specific areas in the process and making rooms for improvements.
Fostering of employees’ “lifelong learning” is an important element of both the development of people and the demographic management at Bayer. In Bayer, they encourage all their employees to refresh and expand their knowledge and skills in all phases of their working lives. Education and training programmes comprises of a wide range of work-related activities that enable employees to broaden their specialist knowledge or acquire a new set of skills, for example by learning a language or acquiring leadership competencies.
Bayer makes an effort to appeal to talented people worldwide and tries to retain employees for long periods of time by providing them with attractive development opportunities. Their success in recruiting employees is attributable to their attractiveness as an employer, which was justified by numerous awards earned in 2013 by their active drive in recruiting activities at the local level.
Bayer also collaborated with leading universities in most countries in order to raise students’ awareness of the wide-ranging opportunities it offers. For example, in China, they have currently cooperate with more than 40 universities and offer up to 500 students a year an opportunity to undertake internships in all areas of the company. In addition, Bayer also offered training programs, scholarships and technical support for their dissertations. (AG, Annual Report 2014)
Bayer had effectively used education and incentive signalling approaches to signal the potential employees since they have invested a lot in their recruitment activities moreover, partnering with universities globally and providing internships and trainings for them. Through these activities they can effectively signal potential employees and measure their possible potential or possibilities they can provide to the company. As failures is costly to employees, employer and their reputation. Hence, it is important that they screen the correct candidates and minimize adverse selection and irreversible damage cause to public health.
Therefore, education used as a signal is important due to the work nature of Bayer. Their job scope is highly inclined and dependent to education where applicants must be highly knowledgeable eliciting competency as the same time as the jobs they offer requires high specialization instead of a general knowledge for productivity and the future successes of Bayer.
Internship programs could also serve as their probation and self selection model to actually assess the applicants and screen those interns that they would like to extend or offer an employment. This could indicate that with higher level of education, these could mean higher level of productivity whereby grades could be an assessment of their potential productivity with same degrees attainment employees hence, resulting in wage differentials.
Bayer tries to appeal to the potential individuals globally and retain employees for long periods by providing good development opportunities, a modern working environment and competitive compensation Training programs they provide is opportunity given to employees to upgrade their skills to yield higher productivity where this could also means opportunities given for employee to actually have a promotion with increased productivity which in turn gain more incentives or wage with the promotion in their incentive scheme to signal and motivate ability employees. Signaling only works if the incentives of employees are being addressed, ultimately workers aim is the incentives they are looking for in exchange of their labors.
Bayer could try to employ data mining technique as one of their signalling approaches. As this technique could allow them to screen existing employee or new candidates more accurately as more information is being reflected clearly in this method and compare against other candidates. Company would have information they needed on individuals they want to screen for internal promotions to fill up vacancies available before sourcing externally their behaviour, job performance, productivity and education would be clearly shown over time. But internal infrastructure would be ideal for data mining technique since it is a technique suited for long term use. Moreover, due to the job nature requirements of Bayer, it is ideal that they screen for internal candidates first before sourcing externally as their inventions revolves around a lot of patents and trade secrets as the higher the ranking or hierarchy the more things they would be facing and dealing with.
Job assignment could be used as a signalling approach although not a very precise method but it could be an add on in assessing employees. It would reflect efficiency of employees although not productivity. After all, with education used as a major signalling approach, employees employed have more or less elicited certain abilities and productivity which is why they are valued. It could be a signalling approach when comparing against employees of same degree or specialization to be competitive advantage and promoting the correct candidate in order for Bayer to achieve higher productivity and success rate.
Although Bayer have an outstanding recruitment activities being used and improved actively and well known for being an outstanding employer with the high rates of employment they can achieve globally and providing numerous of employee benefits, but there are some minor improvement which they can make to improve overall system. Hence, Bayer reflects heavy investments made in their recruitment activities therefore it is costly for them to recruit wrong employee which might lead to severe losses incur to them.
In conclusion, data mining techniques and job assignment could also be some of signalling approaches they could employ to improve their accuracy of signalling so that adverse selection and risky hires could be minimize as much as possible as mentioned above.
AG, Bayer. Annual Report. 28 February 2014. http://www.annualreport2013.bayer.com/en/employees.aspx (accessed July 20, 2014).
—. Bayer : Science For A Better Life. 23 July 2014. http://www.bayer.com/ (accessed July 17, 2014).
Brewer, Dominic J., and Patrick J. McEwan. ECONOMICS OF EDUCATION. Spain, 2010.
Chien, Chen-Fu, and Li-Fei Chen. “Data mining to improve personnel selection and enhance human capital: A case study in high-technology industry.” Expert Systems with Applications, 2008: 280–290.
Delfgaauw, Josse. “Signaling and screening of workers’ motivation.” Journal of Economic Behavior & Organization, 2007: 605–624.
Lazear, Edward P., and Micheal Gibbs. Personnel Economics in Practice. 2nd. United States of America: Don Fowley, 2009.
Waldman, Michael. “Job Assignments, Signalling, and Efficiency.” The RAND Journal of Economics, 1984: 255-267.
Weiss, Andrew. “Human Capital vs. Signalling Explanations of Wages.” The Journal of Economic Perspectives, 1995: 133-154.
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