Labour Market and Synergies

Labour market
Your employees are one of the most important resources your company has. As the labour market is the source of potential employees, it is worthwhile to observe the labour market regularly. The behaviour of workers and labour unions can influence the performance of your company significantly. The bargaining power of each individual employee or job seeker depends mainly on following two criteria (Lombriser & Abplanap 2005):

  • The costs that occur in your company as a result of releasing an employee. Such costs depend on the qualification of the worker, the complexity of the work and duration of employment in the company. These workers cannot be replaced easily, so that they can enforce wage claims easily and there is little chance of them being let go.
  • Labour market conditions. The lower the unemployment rate in the market, the lower the chance of finding a suitable replacement. In this case, the bargaining power of the employee increases and he is able to achieve a higher wage. If there are a high percentage of unemployed people, it is easier for employers to find another worker. Therefore, the bargaining power of the employees decreases.

Synergies may sound like a good idea but you have to be careful when adopting such strategies. You have to take into account that synergies normally incur high costs, as they are time and resource consuming. So if you find possible synergies in your company you have to calculate, if the gain in one sector outweighs the losses in the process coordination.