Re- aligning the workforce to a ‘new business’

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Re- aligning the workforce to a ‘new business’ at O.I.G.

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SHR015-2 Assessment 2: Case Study: Re- aligning the workforce to a ‘new

business’ at O.I.G.

Optimal Insulation Group (O.I.G.) provides a range of insulation products to the construction

industry, customised to the requirements of medium-to-large size firms specialising in both

domestic and commercial construction projects. It is a subsidiary of a Canadian company,

First Quantum Materials Ltd, headquartered in Vancouver. In the past year, new markets in

home insulation appear to be developing whereby O.I.G. has the opportunity not only to

supply large corporate customers, but smaller, locally-based builders and home

improvement merchants also. Because of increased competition, reliance on the new market

is estimated to increase in terms of overall business share.

The UK subsidiary is based in Manchester and Cardiff and has 6 departments: information

systems; product development; specialised support staff; marketing; finance and HR. The

company has expanded considerably since it was founded four years ago, initially with the

close guidance and support of First Quantum Materials. There are 295 full and part –time

employees (195 in Manchester; 100 in Cardiff), mostly recruited in the past two years. O.I.G

is an ‘agile’ business which means employees have to be technically adept and highly

flexible in response to specifications of what clients want. They work in project teams (some

as ‘virtual’ teams) that can vary in membership, forming and disbanding as projects require.

O.I.G.s strategic goals are to secure sustained growth by the development and marketing of

materials designed to meet new and continually changing UK / European standards of

insulation efficiency in building design and also to provide ever-improving levels of service to

clients based on more bespoke products. The growth plan is based on an aggressive 20% year

on- year- growth in like- for- like sales…however, there is not clarity on how this can / should

be achieved, for example through buying market share or more high profile marketing. One

year into that business plan and it is clear that revenue into the business is falling short of the

growth required and the CEO has suggested a review of staffing levels at both sites and an

initial information item on this has recently been published in the O.I.G. Staff Bulletin, but initial

internal HR recommendations have also been circulated on a ‘need to know’ basis.

The nature of the business clearly indicates that competitive success can only be achieved

and sustained by developing and sustaining human capital advantage. A Pfeffer type, highperformance

work system (HPWS) based largely on the practice of the parent company has

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been introduced. Priority has been given to the introduction of rigorous recruitment and

selection procedures, extensive and relevant learning and development activities, and

incentive pay systems. A considerable amount of work has also been done to upskill O.I.G.’s

HR Team to use new techniques associated with human capital analytics (HCA).

The former chief executive has returned to Canada and a new chief executive has been

appointed from within the company. The HR director, who associated well with the new chief

executive, thought that this presented him with an opportunity to do something about

ensuring there was a closer match between the workforce and how it is arranged and the

strategic business objectives of O.I.G. This ‘alignment’ process had been introduced by the

previous HR director who left at the same time as the last chief executive and was a

fundamental part of HPWS, but he did not think it was working very well.

A major operational business objective at O.I.G. was defined by the incoming chief executive

as: improving business performance by each individual’s effectiveness in applying HPWS.

This requires close collaboration between employees and line managers. This message was

transmitted by the CEO 18 months ago, direct to all employees at a staff event.

The HR director got a senior HR business partner to investigate how HPWS and the use of

HCA by the HR department was working in practice. From a number of discussions with staff

she confirmed it was not working very well. Some managers were clear about the key

features of HPWS and were keen to see the use of an HCA measurement map in relation to

specific high performing work practices (see Table 1 below) by both line managers and staff,

working with their respective HR business partners. The majority however were not

particularly interested, regarding it as a chore, so that if they did it at all they did not do it

very well. She reviewed the way it had been introduced and found that a detailed and wellwritten

booklet had been produced giving guidance. Because O.I.G. tended to operate in

separate departments it was unclear as to what extent this information had been

disseminated to employees.

Table 1: HCA Measurement Map.

1. Investments in

People

This is the intervention / series of interventions intended to drive business

results. It can be any type of investment in human capital – a training event, a

recognition programme, a performance management process etc.

2. Leading

indicators

These are non-financial values that suggest whether you are on the right track.

They might be things like internal / external hire rates / implemented

improvement ideas / numbers of complaints etc.

3. Business Results Often referred to as key performance indicators (KPIs) business impact ‘metrics’

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are tied to a financial value. If a metric does not have a financial value, it is not a

business impact metric.

4. Strategic Goals The desired end result of the initiative or set of initiatives. For most

organisations, this ultimately boils down to improving financial performance –

either by increasing revenue , decreasing costs, or both.

adapted from Pease et al (2013) Human capital analytics

She analysed the ratings given by line managers in each department on a 5 – point scale

from E (the lowest for unacceptable performance) to A for exceptionally good ‘alignment’.

Only two of Pfeffer’s seven practices were researched though.. (‘sharing financial and

performance information across the business’ and ‘self- directed teams with delegated

decision making’).

The results for ‘sharing information..’ are given below (Table 2):

She found the results were very skewed to the higher levels – 11 per cent were ‘A’, 74%

were B (highly effective alignment), 12 per cent were ‘C’ (acceptable alignment), 2 percent

were ‘D’ (improvable performance) and 1 per cent were ‘E’. She also analysed the

distribution of ratings in each department and established that there were considerable

variations as follows (Table 2 below):

Table 2: Reporting of employees’ ability to share information across the business

Departments Rating percentages

A B C D E

Information systems 12 80 7 1 0

Product development 10 70 15 4 1

Specialised support

staff

9 60 24 6 1

Marketing 15 60 18 5 2

Finance 5 65 20 8 2

HR 5 40 55 0 0

There is a high turnover of staff (Table 3), but the causes of this are unclear. However, the costs of

addressing this issue are significant, due to high costs of advertising using the specialist trade press

(around £4,000 per position advertised). The CEO is keen to know whether there is a relationship

between staff turnover and high training costs (Tables 3 & 4). The HR Business Partner had no

access to financial information, but a friend in Finance was able to produce some data for Table 4.

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Table 3: Staff attrition

Departments Turnover (L/H =

Manchester; R/H =

Cardiff)

Overall size of team,

Manchester 1st; Cardiff 2nd

2014 2015 2016

Information systems 4, 1 2, 0 6, 3 20, 15

Product development 8, 0 5, 1 11, 4 35, 20

Specialised support

staff

9, 4 11, 2 14, 4

30, 10

Marketing / Sales 12, 9 18,10 28, 15 60, 30

Finance 4, 2 3, 1 5, 1 40, 20

HR 2, 2 3, 1 6, 2 10, 5

Table 4: Training costs

Departments Training costs (1st = Manchester; 2nd = Cardiff)

2014 2015 2016

Information systems £15,000;

£25,000

£2,000; £1,500 £35,000;£15,000

Product

development

N/A £25,000; £20,000 N/A

Specialised support

staff

£12,000;

£9,000

£27,000; £14,000 £32,000; £7,500

Marketing / Sales £24,000;

£19,000

£27,000; £18,000 £25,000; £15,000

Finance N/A £9,000; £5,000 £17,000; £11,000

HR N/A £18,000; £7,500 £10,000; £5,000

A separate consultant commissioned by the outgoing CEO has produced some data on

other aspects of the Pfeffer Model that has been applied at O.I.G. This is in the possession

only of the present CEO who has had the information for a while, but has not had the

opportunity to discuss formally with the Head of HR because she does not normally attend

SMT:

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1. Employment security:

Staff have been told via the Staff Bulletin that the need to ‘innovate’ new products for the

non-corporate market is of major importance.

2. Selective hiring

O.I.G. staff tend to be hired based on length of service in similar jobs (internal & external

applicants) together with skills testing. Usually appointments are by panel interview based on

job descriptions produced by HR. Application rates are high because advertising in the

professional press is accorded high priority and this is supplemented by ‘big page’ ads in

newspapers also..

3. Self managed teams & decentralisation of decision making

There has been an increasing shift to ‘virtual team’ working but the effectiveness of this has

not been monitored so far.

4. Extensive training

HR control access to formal accreditation to required certifications e.g. related to essential

health and safety / manufacturing practice. However, there is a pool of money divided

between the divisions based on a historic parent company formula that accounts for around

60% of O.I.G.s ‘spend’ on training.

6. Reduced status distinctions & barriers

The company are proud of their achievements here and have introduced new dress codes

for both male and female staff. Managers no longer need to wear suits, and ties are optional

except when meeting clients. Men and women can ‘dress down’ on Fridays but women are

not allowed to wear trousers in the workplace. Separate catering facilities for ‘management’

and ‘operations’ at both sites were initially combined but very quickly the staff canteen has

been closed at Manchester for reasons of economy and a catering van from an external

agency now supplies the overall workforce there.

7. Extensive sharing of financial & performance information

This occurs, but for ‘commercially sensitive reasons’, it tends to be circulated outside of

management only after a time lapse of around 6 months.. Cardiff staff feel they are the ‘end

of the line’ on company communication which comes via line manager briefings which are

not always held promptly because of ‘operational pressures’ at the factory and the inability of

LMs to always attend the briefings held by the CEO which are usually at the Manchester HQ.