Home Solutions 1. What goals have been paramount so far in this company’s approach to HRM?
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Assessment Marking Sheet
BA (Hons) Business and Enterprise Management
BA (Hons) Culinary Arts and Business Management
BA (Hons) Hospitality and Business Management
BA (Hons) Tourism and Business Management
Date of submission:
Learning outcomes assessed:
As listed in the course handbook.
Areas of Improvement
Originality of treatment of the issue: fresh perspectives are introduced to support lecture material
Research: Evidence that the issue has been researched, using a variety of appropriate sources
Appropriate use and application of HRM/OD theories, models and concepts and ability to critically evaluate them
Accuracy and coherence of arguments – evidence of understanding and implications of issues to organisations.
Presentation and Formatting – Use of English language (spelling, grammar). Technicianship of referencing to house style. Appropriateness of presentation, layout and length.
Deductions: Late Submission
Total mark out of 100%
Subject to ratification at the validating University Subject Board
Please note that all assessment may be subjected to a viva voce
HR&OD RESIT TASK
You are required to produce a briefing sheet on a subject / issue relevant to a case study. Please choose one from the nine case studies attached to this assessment brief.
You will develop on the theory and concepts using case study material as the means of applying theory to practice. The main criteria regarding the suitability of material will be its potential to address the specific topic and the theoretical focus indicated.
The briefing sheet should be 2500 words.
It should include the following elements:
Please submit the briefing sheet by Sunday 20th August 2017 via Moodle by Midnight.
Case study 1: Clothing firm meets nemesis?
You are the newly appointed Operations Director for a multinational clothing company, replacing an operations manager who left to start a new firm. You have an extensive background in the industry, having held operational management roles in three international clothing firms, and having worked in three different countries. You are the first operations executive in the company to have a seat on the board.
The company you have now joined is not a household name but is a major supplier of international retail chains, making vast quantities of women’s fashion items (outer-wear) for house-label ranges. The design function is located inItalywhile the company manufactures in a diversified range of low-cost countries, includingMexico,Morocco,China,Bangladesh,Sri Lanka,Indonesiaand thePhilippines. It does not manufacture in any high-wage countries. The company has prospered from the escalating trend to offshoring in the last 10 years but its price margins are under constant pressure from its powerful retail customers. The factories the company owns, or jointly owns, are managed by trusted, experienced expatriate and local management staff.
The company is a lean kind of operation in corporate terms. There are no head-office HR staff in the company. Up till now, the company’s CEO has taken personal responsibility for recruiting and managing plant managers. As the new Operations Director in this company, you will now be responsible for performance management of the plant managers and this will include any people management issues that come up in the process.
The board you are joining is small, consisting of the chairman (who has extensive industry experience and a major shareholding), the CEO (who also has a major shareholding), the head of the design function, a finance director and the company’s longstanding lawyer. They are very experienced in the industry, know its work practices well, and are not attracted to modern ‘HR’ jargon. Unions are not really a big factor and they maintain a pragmatic attitude towards them. This means they do not actively seek to negotiate with unions but, where they are a strong industry feature in a particular country, they expect plant managers to conclude a collective agreement that is cost effective (i.e. that meets company operating margins) and maintains uninterrupted production.
Peak-level demand now outstrips what the company’s own plants can deliver and, prior to your arrival, the company set up arrangements with several contractors to supply merchandise made to your specifications. Like the company’s own plants, these contractors operate in low-cost countries. The company has good control over production lead times through electronic ordering and an excellent logistics management system developed by your predecessor. The contracting process is helping you keep up with demand. The company has only chosen contractors who meet good quality standards. Using the contractors has enhanced your company’s reputation for being able to deliver variable styles and quantities against tough deadlines.
The future looks good but a problem has arisen within two weeks of you starting on the job. A human-rights watchdog group, linked to an emerging trade union movement in aFar Eastcountry, has written to you complaining of human rights’ abuses at one of your contractors’ plants. Using information from employees and the internet, they have researched the links between the contracting company and your firm and the prominent Western retailers that you supply. They are threatening to publicise the breaches, which they allege include suppression of union activity through sacking of union activists, declining to meet to discuss a process for collective bargaining, and instances of child labour.
If possible, however, they wish to work cooperatively with your company and are giving you the opportunity to respond. You fly out to meet them, listen to their evidence, and then meet with your contractor’s management team. The company’s management are not entirely straight with you about their attitude to unions and their procedures for recruitment and dismissals. You feel the complaint about abuses is most likely accurate. You then fly home and prepare to meet with your fellow directors on the board to discuss the issue. You wonder if you might meet with a fairly hard-nosed response there if you suggest any changes and, being new to the company, feel you must play your cards carefully.
a) Do nothing different in the way you manage your contractors and if any bad publicity does eventuate, distance the company from it, saying it is a matter for the contractors.
b) Cease using contractors altogether so you have control over how people are managed.
c) Make changes to the way you manage contractors (if so, what?)
d) Make changes to the way you manage contractors and your own plants (if so, what?)
3. Does your recommended option in answering question 2 imply a change in the goals the company should pursue in its HRM? If so, in what way? Why do you see this as important and what implications will there be for the company?
Case study 2: What to do with Jonathan?
The company is a large conglomerate with 20 companies in the group. Its corporate board consists largely of executive directors whom sharemarket watchdog groups argue have very generous base salaries as well as highly valuable share options. The latter have been justified at AGMs on the basis that (a) they help to align executive with shareholder interests, and (b) almost everyone else has them.
The company’s share price has certainly improved over the last 5 years – by some 50% in fact. Critics of the share option scheme are undeterred. They say the whole market has risen and while the board may be competent, there is no evidence that it is outstanding.
The debate rages on. What shareholder watchdog groups do not know is exactly how executives further down the corporate tree are assessed and remunerated. While overall performance is deemed good, a small number of business unit chief executives are under-performers. In one of the group companies, a merchant banking organisation, the CEO – Jonathan – has a high base salary and a generous allocation of share options in the group, making him potentially very wealthy. This scheme was set up 4 years ago. Jonathan, an old school-friend of the group’s chairman, was hired from outside the group.
Unfortunately, it has become apparent that the banking business unit has dropped from average to bottom quartile performance in its industry segment in that timeframe. Initial performance reviews conducted by the group CEO with Jonathan involved approvals of several cost-efficiency strategies designed to cope better with a market that Jonathan said was driven by margin-based competition.
In the last year, it has become apparent that while the bank’s cost structure has been re-shaped, profitable growth opportunities have been missed. An independent industry-analysis of the bank commissioned by the group’s head-office strategic planning unit, and then debated at the corporate board, argues that the bank is neither innovative nor a fast follower in a market environment where it needs to be one or the other to survive.
In his last annual review of business performance with Jonathan, the group CEO asked for his assessment of rising managerial stars in the bank. Unfortunately, it seems that nearly all key staff below the CEO level in the bank have been headhunted by competitors in the last two years. The most experienced members of Jonathan’s senior management team have all left to join competitors in the industry. His direct reports are now all young, newly promoted staff with no prior senior management experience. His management team meetings are brief and almost administrative in tone. There is very little challenging of his views and little time is spent discussing the bank’s strategic direction.
The group CEO and the corporate board are now wondering what to do about Jonathan and seek your advice.
1. Was it a good idea for Jonathan’s remuneration to include share options in the group? Why/why not? If there is a demand for some kind of performance incentive for business unit CEOs in this kind of group, what would you recommend and why?
2. What sort of difficulties can arise in strategic management when there is little debate in a senior management team? In this case, what most likely accounts for the low level of strategic debate in Jonathan’s team? What lessons would you take from this?
3. How should the corporate board manage Jonathan at this point in time? Given his performance in the strategic management process and the fact that the most critical appointment in any company is that of the CEO, identify the relative merits of:
a) dismissal of Jonathan and immediate search for a new CEO
b) retention of Jonathan but reformulation of his objectives and remuneration package, and an agreement with him on a suitable external consultant to immediately begin facilitation of better teamwork in his senior management team.
Case study 3: Sue upsets the applecart
The partners of a small accountancy firm have just made a radical new appointment: the firm’s first HR manager. The firm, which has 9 partners, has grown to 150 employees. Now, the partners feel, their people management activities need more professional support. They have always prided themselves on running a friendly, caring style of staff management but other firms like them, with around 100 to 300 staff, typically appoint HR specialists.
Accountancy might seem to be about numbers but they know that running an accounting firm is actually a people business. It depends on recruiting good staff, training them in the key practices of professional accountancy, paying as well as you can (but not over the top), doing your best to hang on to high performers, and so on. Every year, the partners collectively monitor each other’s profit performance and engage in the soul-searching process of deciding who, if anyone, will be offered the ultimate accolade of being invited to join them in partnership. The firm is successful and being a partner is hard work but very rewarding.
The new HR manager has actually arrived from the public sector but from no ordinary part: from an elite department within it. This is a branch of government which only recruits people with first-class honours degrees from the top universities and which invests heavily in their ongoing development. The department, which will remain nameless, is not one of the mainstream parts of the public service, where budgets are always under pressure, but a small, select cadre dealing with the crème de la crème, much as the French do in the higher echelons of their public service. Its HR policies are well established, well resourced and well insulated from other branches of government.
The new HR manager, Sue, was an HR advisor there and, like everybody else, has a first-class degree from an elite university and, in her case, a flair with foreign languages. Even though she had no private sector experience, she told the partners she was keen to get into private-sector HR work and develop her career further on this basis. She feels more attracted to the private sector than the public, despite the excellent conditions she enjoyed in the elite unit. She clearly sees herself as rising, in due course, to a position as HR Director in a top-100 company. The partners responded warmly to this and decided to recruit her because they considered her experience in the management of professionals would have carry-over value to their firm.
Things went well for the first three months. Sue immediately threw herself into helping the firm with its annual recruitment of new accounting graduates. This greatly relieved the managing partner and his PA, who had previously handled this work themselves and could now rely on someone to handle campus liaison, presentation of the firm at recruitment fairs, and initial screening of candidates to create a set of ‘good possibles’ that the partners could review.
Now, however, the partners are worried. Their staff have been coming to them to discuss what they (the partners) consider to be unrealistic expectations for personal development. From these conversations, they discern that Sue has been talking freely with staff about the career development programme where she worked previously. There, it transpires, staff were encouraged to enrol in postgraduate degrees at the employer’s expense (all fees paid) and were, in fact, allowed plenty of paid time off to attend classes and also to prepare for exams. This largesse was available after only one year with the department. Sue was talking freely about this personal development policy as an HR ‘best practice’ and staff were getting the idea from her that the firm should adopt more generous HR policies and become an ‘employer of choice’ in the industry.
They decided to call Sue in for a meeting to hear her views on HR issues in the firm. Sue started by talking about ways of improving their employee selection practices through some tests to assess cognitive ability rather than relying on university grades and a more formal method of reference checking for experienced job hires. All this sounded good and the conversation ran along in a non-threatening way for some time. Then, Sam, the managing partner, decided to grasp the nettle:
I think I speak for the partners when I say this is all very good, Sue. We like your ideas on how to make this firm a more effective recruiter and I know I’ve benefited already from your assistance with this year’s graduate recruitment. However, something has changed in the last 3 months that we are not so sure about. Staff have been coming to partners with the idea that the firm should pay for postgraduate study for them and give them generous time off for study. We’ve never done this sort of thing before and, more importantly, we try not to raise these sorts of expectations. After all, everything we do has to be charged to clients and, as we explained to you at your recruitment, we’re not a first-tier accountancy firm… We’re in a tier of small and mid-size firms where we try to pay well relative to our competitors and can look after people, up to a point. People often come to us because they don’t want to work in a huge firm where nobody takes any notice of them. They’re not the A students but they are good B students who can do the job well enough. We have a personal touch with our people. When Jayne, who has worked for our tax section for 28 years, had a stress breakdown last year when her husband died suddenly, we gave her 3 months of paid leave to help her recover. That’s the sort of thing we do but we’re never going to be big spenders on further education for new staff. There’s always going to be a high rate of attrition among new accounting graduates. At least half of them will leave us after 3 years, that’s the reality. We see their best development as taking place through the experience we give them, not through more education …
Sue thought for a while and then responded:
Well, I think you are in the game of managing professionals and professionals have these sorts of expectations these days. I think you have to change or … die. Yes, I think it’s as serious as that: you need to evolve beyond a small-firm mentality. Any HR professional will tell you the same thing. How do you expect to become more successful if you don’t embrace best practice?
At this point, another senior partner, Joe, chipped in:
But we are successful! Your view is simply not commercial. It’s not something accounting firms operating in the private sector can take seriously. If one size fits all in ‘HR’, then I say, ‘HR be damned’.
This brought a nervous laugh or two and, as it was now after6pm, Sam, sensing the need to de-stress the situation, suggested they adjourn to the pub. Perhaps they might be able to take the matter further there, in a more relaxed vein ….
a) the partners have managed Sue so far?
b) Sue has approached her relationship with the partners?
Case study 4: Mobile reps become more mobile
The company in question is the local division of a large multinational telecommunications company. It is one of the smaller players in the country but has been growing quickly in revenue and is now seen as a good competitor in the industry with high profit potential. It is not unionised. Group headquarters is based inGermany.
Internationally, the company takes advantage of all the best technology and design skills available world-wide and outsources its manufacturing to reliable suppliers in low-cost countries who offer the best deals at the right quality and on good delivery terms.
There are 70,000 employees world-wide with 2,000 based in your country. The operation depends on a network of shops in which staff sell the company’s products over the counter. Below the senior management level, the local chief executive has been told to do whatever makes sense locally in staff management. The HR Director inGermanysaid:
You know your national operation will be judged on its financial results at the end of the day. That’s where you have to perform but we are not going to tell you how to run your HR policies.
The local chief executive hired an HR manager from the retail sector who has been responsible for setting up an HR policy manual that all the branches use. The approach is fairly standardised. Sales staff in the branches are paid in a range which rises from 30% to 50% above the average retail wage. The company knows it needs to pay people with technical knowledge a little more to get good people and the pay range has four steps so that the more experienced and reliable people can be paid more by the branch managers. Sales staff are expected to assist each other to maximise the branch’s revenue and customer retention. They do not have any individual performance incentives. The labour market is tight and keeping top sales people can be a headache.
The local senior management team focuses on new business opportunities in the telecommunications market. Recently, seeing the opportunity to increase market share with a very advanced, multi-purpose phone, they launched a more targeted sales campaign. The idea was that these phones would be promoted to wealthier people who do not get to the shops very often and to staff in ‘techie’ companies, using special offers emailed and texted to them and follow-up phone calls.
The marketing department made up regionally-based lists of hot prospects for sales and the HR Manager was asked to target 80 core, high-performing staff to focus on the new sales campaign, drawing them from the most successful branches. These reps would be enabled to work from home or in convenient company offices behind the scenes. She approached them individually, and issued the ones who accepted (90%) with business cards and their own personal cell phones (the new, very advanced model). She explained that senior management had promised exciting career development prospects (although what exactly was never specified). All attended an initial three-day training course at the company’s training facility. Apart from these changes, the sales reps stayed on the same terms and conditions of employment as before.
To begin with, the new sales campaign was good fun. The people chosen to run it were high performers and made very good sales. In the first six months, the company increased its share of new mobile phone sales by 10%. While the specially chosen reps reported to their former branch managers, how often they kept in touch was entirely in the hands of branch managers who were typically under work pressure due to demanding performance targets in their branches. They generally regarded the new sales initiative as a pet project run from Head Office and resented the special status of the chosen reps, as did branch staff. No new staff were provided to the branches and workloads rose. There was a noticeable increase in absenteeism and labour turnover at branch level. Customer surveys showed signs that this was affecting perceptions of customer service.
These pressures were a growing problem but then things got worse. Labour turnover rocketed among the reps working on the new sales campaign. The reason? A large competitor used one of their external HR consultants specialising in recruitment in this industry to identify and start recruiting what was clearly a group of top sales people, the cream of their competitor’s workforce. The reps were offered either a good sales position or a branch management position, depending on their skills and interests. Both positions offered a higher base salary and a very attractive commission, which would cater to their high levels of productivity. Your company’s share of the mobile phone market has now started to decline.
1. a) What kind of approach to local HR strategy did the German HR Director take? What perspective on strategic HRM does this illustrate?
b) Do you consider the way (or how) the German HR director carried out his approach wise?
2. Should the company have done some things differently when it launched its new sales force? If so, what and why? Relate your answer theory.
3. What lessons about employees as strategic resources and about barriers to imitation in HRM would you take from this story?
The company in question is a long-established English food manufacturer with a handful of well-recognised, if somewhat traditional, food products, sold widely in supermarkets and still enjoying a loyal following. Having been started some 110 years ago, it is not so much a business as a venerable institution. Generations have worked at the company’s (sole) plant, which currently employs 800 people, and accounts for much of the employment in the small town in which it is located.
The company has been owned by one family, the Mortleys, for the whole of this time. Until very recently, the company was led (in the position of managing director) by Mr Cedric Mortley, the grandson of the founder, Sir Aston Mortley. Affectionately known as ‘Mr Cedric’, to distinguish him within the esteemed family line, Cedric Mortley was a gifted engineer and an inspirational leader. He took pride in knowing the names of every worker in the plant. With the older generation, this would often be on a ‘Mr’ or ‘Mrs’ basis to show proper respect while, as the world changed and a younger, more informal generation took their places, it turned to first names. He was also a tireless worker, just as much at home in overalls (some said more) as in a business suit. When a difficult problem arose with any of the equipment, he would be there to see if he could assist.
Under the guiding hand of the Mortley dynasty, the plant has been a classic example of what some call ‘welfare capitalism’ or ‘benevolent paternalism’. The fact that, somehow or other, lay-offs were avoided in the Great Depression is an often-recalled fact. Placing family members into work, though not always in the same department, has been an article of faith. Many a restless youth has left the local secondary school to join the factory, under the watchful eye of one of their parents or another member of the extended family – an aunt, an uncle, an older cousin.
Virtually all the trappings of welfarism have been present: annual company picnics, regular visits to any employee in hospital, heavily subsidised coach tours for retirees, a sparkling canteen, a beautiful company garden with outdoor seating, and so on. Mr Cedric did as much as anyone to continue and extend these features. In his time, a trade union did organise the plant, mainly through the efforts of the maintenance staff. Mr Cedric quickly provided the union with a fine office and agreed to meet for bargaining. Annual pay negotiations have proceeded amicably because the company has made a fair and reasonable offer every time. Staff have rarely, if ever, wanted to question it.
The benevolent paternalism shown to staff by the Mortleys has helped to build a high level of loyalty despite the repetitive and low-skill nature of the work in the factory. Production jobs have been organised into different departments making different products and have been fairly highly specialised. There has been little job rotation but many workers have liked this because of close friends in the same department.
The factory runs on traditional know-how, rather than anything fancy. Few of the staff have had much experience with computers, as compared with their children or grandchildren. There has been a strong apprenticeship system for maintenance workers but few production workers have ever needed to obtain ‘academic qualifications’. The company’s on-the-job training has been more than enough. Aptly called a ‘Sit-by-Nellie’ system, it has worked well because Nellie knew what she was doing and was quick to tell you if you didn’t.
In the last 20 years, the company’s traditional products have retained a kind of cult following. This has allowed the company to fight off lower-priced rivals and also allowed it to carry on with little new investment in high-tech food manufacturing systems. There has been no new food processing equipment for 30 years except for a new canning line introduced 5 years ago. Operations have remained more labour intensive than is the case in many parts of food manufacturing though it has proved more and more difficult to recruit staff. The company has an ageing workforce, more young people are in higher education nowadays, and new migrants, often with low English literacy, have increasingly been recruited as older people have retired.
All good things come to an end and this almost idyllic picture was shattered last year when Mr Cedric, tinkering inside an old boiler hauled off its work station for maintenance, suffered a massive heart attack. He had no second chance. The funeral, five days later, was attended by not just the whole factory but by most of the town and by half of the county, it seemed.
Then events started to move fast. It transpired that no one in the surviving Mortley clan had any inclination to step into Mr Cedric’s shoes. Mr Cedric had been the public face of the family but things were quite different behind the scenes. The current generation, in fact, had little interest in manufacturing, mostly lived in warmer climates, and now just wanted their money out.
As luck would have it, an American food multinational, looking for just such a manufacturing base in Britain, kindly obliged at a ‘good enough’ price and without bothering with due diligence. It was known the plant was outdated but its large site, capable of further expansion so that it could serve as a base for exporting US-developed food products throughoutEurope, was the key to the acquisition. Its location in an English-speaking environment makes it that much easier to relocate US managers and their families. Its established line of products on the shelves of British supermarkets was not an acquisition motive but something of a bonus that would help to underwrite cash flow in the short run and that would provide the entree to introduce US products.
You, in fact, have just been transferred fromChicagoto become the new Plant Manager, reporting directly to your boss there, the Global VP: Manufacturing. Your authority extends over all local managerial staff, including those now in place and those who will need to be brought over from theUSin due course to transfer your information systems, technologies and manufacturing disciplines.
Your company is well known for modernising food manufacturing plants to make best use of advanced manufacturing technologies. Its reputation for creating efficient scale and for quality and safety is high. It sees its success as lying in capital-intensive plants with high capacity utilization.
Your instructions are, first, to ensure that current production continues without disruption, and, second, to develop a plan for the plant’s future based around a substantial capital re-fit and expansion of the product range so as to launch the most Euro-attractive of theUSproducts into the European market.
The company is an innovative IT service business, providing consulting and software applications to insurance companies. It has 700 employees, all of whom are employed on individual employment contracts. If its historical rate of growth continues, it expects to have 1000 staff fairly shortly. The firm has expanded very quickly in its specialist segment of the industry and senior management realises its HR policies have not kept pace. Given the company’s desire to be professionalise all parts of the business, two years ago, Angus, the CEO, appointed an HR Director, Glenys. Since then, she has built a small HR department of 3 staff.
Glenys is a member of the senior management team, which also includes Angus and five other senior managers: three in charge of service divisions, one in charge of the company’s own information systems and one the financial controller. All have lower level managers reporting to them, with the greatest number of middle managers and team leaders (first-line managers) in the operating divisions.
With Angus’s full support, one of Glenys’s first acts, 21 months ago, was to hire a firm of HR consultants to help the company develop a good performance appraisal (PA) system, one which would help managers to set performance objectives, formalise the process for making merit-based pay recommendations, and foster employee development. Senior management, led by Glenys, worked with the consultants on the design of the system. Angus felt he could leave it to the members of his senior management team to speak up if they thought anything was unwise in the design and, besides, he thought, “I’ve now got a highly paid HR Director and an HR department and they’re the experts on this stuff.”
The new PA system is based on setting individual performance objectives on an annual basis (a management-by-objectives (‘MBO’) system). It involves staff participation in setting these goals and requires managers to keep an eye on how goals are going every three months in case some goals need to change or employees need coaching. At the end of the financial year, the system requires managers to meet with each of their team members to discuss achievement against planned goals. It uses a five-point rating scale to assess overall achievement against these objectives, anchored as follows:
The performance appraisal system is not simply about performance issues, however. Once the performance rating has been discussed, it then moves into a section on employee development in which the manager is supposed to discuss employee knowledge and skills and agree a development plan, which may include training recommendations.
All the company’s managers were put through 2 days of appraiser training. This was designed to help them deal with such issues as ‘rater bias’ and how to handle difficult appraisal interviews. After the training was complete, the consultants declared the system ‘installed’ and departed. The CEO, Angus, then told managers to go ahead and set objectives with each team member. This was done, not without some difficulty, but it happened. Then, after 12 months, appraisal interviews were carried out, with Glenys and a member of her staff helping to ensure this happened. Managers found the system’s requirements somewhat laborious but at least the forms were on-line and the recommendations on pay and training could be sent directly to the company’s HR department that way. Some four months ago, Glenys informed Angus that all the recommendations had arrived.
Unfortunately, no merit pay increases have emerged yet and disquiet is bubbling up among the staff. A round of post-installation focus groups, comprised of randomly selected team leaders and staff members, has just been conducted by the HR consultants who installed the system. They show that employees are losing confidence that anything positive will come out of the new PA system. The sort of comments people have been making include the following:
The idea of rewarding our stars is good but HR makes it all too complicated!
Look, I’m prepared to give them the benefit of the doubt but the whole thing has taken too long. Why are they not making any decisions?
Well, in my view, things were better before there were any ‘high-powered’ HR procedures in the company. My manager had more pull then and could get his boss to act quickly on a pay increase. There was no form filling and people were gung-ho and pretty loyal for this industry.
Several of the best performing staff have resigned in the last month, moving for better pay and conditions elsewhere. There is currently a very healthy labour market for talented programmers.
Part of the delay relates to a problem with the pattern of appraisal ratings across departments. Managers in Division X, the largest service department (where problematic employee turnover is occurring), have rated 60% of their staff as outstanding (five on the scale) while most other managers in the company have given an average rating of (close to) 4 with around 20% in the outstanding category. Glenys is not at all happy with Division X. Along with the pay recommendations, she has reviewed the training recommendations from Division X: these actually suggest that a lot of fairly expensive training and development activity is needed for most staff there. This is hardly consistent with the view that 60% of the staff are at level 5 in terms of job performance. What are Division X’s managers up to?
Just to make matters worse, the business environment in the insurance industry has deteriorated dramatically in the last 3 months (due to a string of adverse weather events) and this is expected to make insurance companies less likely to commission new software projects. There is now a board-driven directive to review costs in all departments. Angus, who has enjoyed running a high-growth company, now finds himself in the position of having to manage a different context altogether. He has to ask Glenys to meet with him and the rest of the senior management team to review all recommendations for salary increases. Despite lower level managers having told staff that their performance is commendable or outstanding (and, in Division X, that 60% are outstanding), he makes it clear to her that any pay increases will now have to be very carefully handled and will not proceed without his personal approval.
1. Looking first at the situation in Division X, what do you think explains the behaviour of managers in this area and what should Angus do about it?
2. Looking at the situation more generally:
a) What comments would you make about the decision to bring in a PA system and the way in which it was developed? i.e. was it a good idea to develop a formal PA system in this organisation? Why/why not? If it was a sensible decision, were there weaknesses in how it was designed and implemented?
b) Explain how the management of this company, despite wanting to improve the quality of its HRM, has actually moved employee attitudes in a negative direction.
c) Explain how you think Angus and his senior team should handle their current dilemma (a high level of employee expectations and an environment which is less able to meet them).
It seems incredible, but it happened. A year ago, you were laid off from a highly esteemed, family-owned retail firm. It had nothing to do with your performance as managing director: you were simply the best they’d ever had – the family was rolling in the profits you made for them – but everything to do with family politics. The favoured scion of the family had finally reached the age when you could be thanked profusely and set aside (for a very good settlement, of course). You are 60 years old and have spent the last 12 months travelling and turning your nose up at a range of unsuitable job offers.
Now, however, something worthy of your talent has finally turned up. One of the three nationally eminent, department stores has been, reverently, in touch. The company has a well-established store on the best shopping strip or in the best mall in every city with at least 1 million people in the country. It has been there a long time and epitomises much of what people value in an advanced capitalist country: choice, quality, service, shopping as an experience in itself …
And, my, how they need you. The founding dynasty finally passed into history three years ago and the company was swooped on by a private equity fund managed by merchant bankers. The results have been predictable. Some undeveloped real estate was sold quickly for a smart profit and nothing has been invested in the stores themselves. The buying department has lost its way after the real genius behind it left for greener pastures. There has, naturally, been a fall in market share as the opportunities presented by seasonal promotions have not been grasped or the key trends simply missed.
Now, however, the merchant bankers have had the good sense to sell the company to a genuine retailer, a long-established French retail house, whom you know well. And, then, just last week, one of the country’s top headhunters called you, explaining that the new owners would like to meet at what’s understood to be your favourite restaurant in a week’s time. You are, of course, highly esteemed by their board and, cutting to the chase, they want to discuss whether you might honour them by accepting the post of managing director, on terms that will properly recognise all your achievements in the industry.
At last, things are looking up and there’s not a moment to lose …. You know the company well but have spent much of the last year out of the country, travelling to all sorts of places your spouse said were a must now that you both had the time. You therefore spend the week before the meeting doing your research which, in retail, must be absolutely current or it’s no use at all. This consists of a whirlwind, incognito tour of the company’s top 10 stores, running from one to the other as fast as first-class train travel will allow. How much you have always believed in the value of mystery shoppers.
Your tour confirms a depressing (but far from irredeemable) picture of neglect by a group of owners who were industry outsiders and never in it for the long haul. The product line still has its longstanding winners but has not seen any innovation since the head of buying left. The top properties are all still there, thank goodness, but there is a tiredness about furnishings and lay-out that sits poorly with the company’s market position. And, then, there are the people issues, always the focus of the mystery shopper.
What you discover in the stores is that there is no longer a consistent manner in which the customers are greeted. Too many of the staff are disinterested, suggesting a heavy level of turnover of the trusted, experienced staff in favour of temporary part-timers. Nothing wrong with part-timers, of course, but it is the skilled and mature permanent part-timer who makes the best salesperson, not the youngster lacking a bit of cash and simply passing through.
Some responses from staff distress you, in fact:
If it’s not on the shelves, we don’t ‘ave it.
I’ll just get Jane to help you ….(time passes) … Jane’s on her break. Can you come back later?
When, on occasion, you ask for a supervisor to assist, performance is again very variable. Clearly, some are experienced, trained employees, who know how to cherish a customer enquiry and can engage very knowledgeably while others are lacking expert knowledge or are indiscreet about the staff’s shortcomings.
You also discern, in some stores, a tension between concession staff (who sell special branded products within the store) and the company’s own staff. The united promotion of the store, through which all benefit, like boats rising on the incoming tide, is not evident.
You are now prepared to meet the chairman and CEO of the French retail house. The meeting is a delight and goes swimmingly. After initial pleasantries, discussing your travel, they open by saying:
If the consultant did not make it clear, please allow us. We are in this acquisition for the foreseeable future, and we aim to make the investments to restore, and enhance, the company’s fortunes. We would therefore be honoured if you would accept the role of CEO of the company on terms that will naturally be superior to those of your last appointment. The consultant will act for us on that, so let’s turn to the business. We know you’ll have a view, a perspective on the company, so let’s hear your plans …
This allows you to embark on one of your favourite discourses: on the three Ps – products, properties and people. As ever, you affirm the importance of getting these three factors into close alignment, a virtuous circle of customer winners. Properties will need upgrading (you know just the company to do it as professionally and unobtrusively as possible) and the product range will need radical review. You will personally supervise this for the first six months while you get in place the buying and marketing team that will shatter any complacency amongst your competitors. And then there are the people issues….
The company in question is aUSmultinational with a highly regarded global business in the packaging industry, headquartered inNew York. It has subsidiaries in 30 countries. It is one of thoseUSfirms that has long been a leader in the technologies associated with packaging consumer products. It is also one of thoseUSmultinationals that likes to spread its company culture as much as it can. It has a well developed and powerful HR department, which presides over an extensive international HR function.
Under your guiding leadership as Senior Vice President: Human Resources, the company has run a major leadership development programme, which engages all middle and senior managers around the world, drawing them together, in various groups, for a suite of programmes offered at a special campus facility in Florida. Every employee within the top 5 levels of the company’s job hierarchy must have a personal development plan facilitated by their direct manager and his/her manager. The company has an annual leadership conference, attended by all general managers from all group subsidiaries and two nominated senior executives that they bring with them. The idea is to rotate the senior executives who come so as to encourage networking and knowledge-sharing.
There is also an annual sales conference to which the top 500 sales reps are invited. Once again, networking is high on the list of priorities. The 500 chosen constitute one third from theAmericas, one third from Europe and theMiddle East, and one third from Asia-Pacific. Every second year, the company’s manufacturing and technical directors from around the world gather for a conference concerned with leading-edge developments in packaging technology and to oversee joint research projects on technical trends. The company also asks all subsidiaries to have a developmental type of appraisal for all employees and all subsidiaries are required to allocate the equivalent of 3 per cent of their payroll cost, at least, to a ring-fenced training budget so that there is no temptation to cut training expenditure.
For 25 years, the company has been led by the same CEO, Arnold, a veteran of the Korean War and a very likeable man to his friends. To his enemies, however, it’s a different story.Arnoldhas been the architect of some 20 international acquisitions, often in hostile circumstances.Arnoldlikes to win.
For many years,Arnoldhad enjoyed the board’s confidence but the company has had a declining profit performance and share price over the last 5 quarters and the institutional shareholders are now openly critical.Arnoldhas agreed to take early retirement. The word on the street is that the board feels that Arnold, who hates to lose, has drawn them into a process of paying too much for acquisitions, especially in the last 5 years. Some sellers have cunningly capitalised a lot of gains through the acquisition process and the company has generally failed to add sufficient value after its acquisition to reach its pay-back targets.
It’s been a great run, and he will be sorely missed for his inspirational input to the leadership development process and the sales conference, butArnoldis now yesterday’s man. He has been replaced by Cindy, who has risen through the ranks to hold, most recently, the role of Global Chief Financial Officer. Her appointment signals the board’s intentions and has been received favourably on Wall Street.
Cindy has made it a top priority to come to you, as befits the seriousness with which the company has treated its Senior VP: Human Resources. You are old friends, actually, and she suggests you meet at her favourite wine bar/restaurant inGreenwich Village. Cindy buys you a large glass of your favourite Californian wine and then launches into a diatribe:
Look, Arnold’s acquisitions were really expensive, the last four particularly, and now we have to pick up the pieces or face the prospect of some predator buying us up – and then all bets are off. I have no option but to carry out major cost cutting. I’m on a much shorter leash thanArnoldwas: that’s the reality. And, seeing as we are old friends, may I level with you, in confidence?
You just manage to insert:
Yes, of course, you must, we go way back ...
Cindy doesn’t wait to hear more and proceeds:
Good, it’s like this. Every subsidiary in the group is being re-analysed to ensure we understand whether it’s a cash cow, a star, a dog, or a question mark in its respective market – you know the drill. The dogs will be sold, some of them probably for knock-down prices – and those we can’t sell will have to be wound up. This brings me, sorry us, to the HR area. There are two things here. First, your team will play the key role in winding up some plants around the world and, then, sadly, your turn will come. The Board says the HR area needs targeting and, dammit, I’m going to have to run with that. They’re calling into question the amount of money that goes into international HR, all the leadership development stuff, the sales conference, the ring-fenced training budget, you name it. And, once we are a smaller, fitter operation internationally, there won’t be the same headcount needs in the HR department will there?
She pauses, seeing your jaw drop. A wave of nausea is driving through the pit of your stomach. Cindy realises she has shocked you:
Look, I know this is a shock.
She reaches over and touches your wrist lightly:
I’m sorry, but this is going to happen. The whole ‘we’re all one worldwide family thing’ no longer curries favour with the board. The major institutional shareholders have said they think our performance as an international firm has been too indulgent. We’re going to have to be much more cost focused and flexible in the future. This won’t mean that the whole of international HR is finished but we are going to have to streamline it very significantly and this will be part of a new orientation to the way we do business: we are going to have to emphasise ROI more and cuddly corporate culture a lot less. And you are going to have to lay off some old friends in your empire, sorry, department. Don’t quote me on any of this but that’s it.
You try quickly to gather yourself as Cindy continues, more matter of factly:
So, what I want is this: I need your report on my desk in 7 days telling me what the priorities are for (1) the redundancy process coming up, and (2) for the international HR programme in our new corporate environment. You could do a powerpoint presentation and call it: ‘Change management and international HRM in a streamlined corporation – the core priorities’. You’ll need to have a damn good reason for anything you want to retain but I know you’ll play that very astutely … Well, that’s it, now let’s see what’s on the menu.
Gagging on your wine, and trying to gather your thoughts, you look fixedly at the menu. Somehow the roastTurkeyno longer appeals ….
Case study 9: Building an edge in a 3-star hotel chain
You work in hotels. It’s no ordinary job. You are the newly appointed, national chief executive. You work, in fact, for one of the world’s largest hotel companies. Your country is an advanced Western nation with both important business activities and a major tourism industry. The economy is growing. The company you work for has six five-star hotels in your nation’s top cities and 50 three-star hotels spread across the country at convenient sites adjacent to major motorway junctions.
As you well understand, service ma
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