Issues Facing Marks & Spencer - Term Paper Example

 Abstract The purpose of this project is to highlight the human resource management (HRM) issues facing Marks & Spencer in its decision to restructure the organisation into new business units. M&S has shuffled its management in an effort to satisfy growth initiatives by structuring the business into units in which leadership would be fully accountable for profitability. These strategic changes open M&S to face several HRM issues and each will be explored in relevance to the new business units as well as a suitable HRM approach to satisfy problems in the medium term. Organisational Restructure 3 Organisational Restructure: Strategic Human Resource Management Issues at Marks & Spencer Strategic HRM Issues Affecting Marks & Spencer Gaining or maintaining an edge over other companies has become the priority of organisations, necessitating a fundamental rethink of the corporate strategies and business models (Khandekar & Sharma, 2005). In regards to Marks & Spencer, its decision to restructure its management and operations to include seven new, profit-accountable business units was implemented to gain momentum in the intensely competitive UK retail market. However, such a dramatic shift of personnel, and their individual roles and expectations of executive performance, create situations in which strategic HRM issues might well arise. The first strategic human resources issue facing M&S is in measuring productivity within each business unit. Strategic HRM, by its very definition, is the organisational use of employees to gain or keep a competitive advantage against competitors (Mathis & Jackson, 2003). Strategic HRM involves designing and implementing a set of proactive HR policies/practices that ensures that an organisation's human capital contributes to the achievements of its corporate objectives (Wan et al, 2002). Human capital and productivity go hand-in-hand, as the executives at M&S were likely selected to manage the business units based on competency levels and the strategic decision to split the management group into high-visibility business units was likely based on the company's determination that each leader could outperform competition. Measuring, rewarding or disciplining based on future productivity levels within each business unit becomes a tremendous potential issue in terms of strategic Organisational Restructure 4 HRM practices. For instance, Marks & Spencer indicated that each business unit would be fully profit-accountable stating that "no one under-performing part of the business will be able to hide behind results of the group as a whole." (Beardwell et al, 2004). Having made this statement, M&S now maintains a strategic obligation to continuously monitor the productivity of each unit leader and establish a method to reward or discipline the performance levels of management. If the main goal of the restructure was to create a competitive advantage over rival retail units, strategic HRM must identify opportunities for improvement based on managerial performance; especially to satisfy the stakeholder position. Further, M&S faces a potential strategic HRM issue involving the proper fit of leadership to their business unit. Strategic HRM is often referred to as a "best-fit" practice in which the closer the fit between the organisation's HRM policies and practices, the more effective the organisation will be (Hughes, 2002). To highlight this potential problem with best-fit, it is important to use the examples of Rory Scott's promotion to lingerie and Jacqueline Paterson to beauty. Both managers were promoted from external business groups in which their previous roles were significantly different than their current positions at M&S. As mentioned in the case study, Marks & Spencer maintains a tradition of promoting from within, which can usually guarantee a higher degree of business knowledge regarding overall operations. By promoting from the outside, the company will likely have to institute extensive training and development initiatives to ensure that the externally-promoted employees are inline with business operations. If Scott and Paterson do not fit into their new positions in terms of driving success within their units, M&S may be inadvertently undermining their attempts at Organisational Restructure 5 increasing competitive advantage. It is vital that the HRM practices are aligned with profitability objectives in all of the new business units that motivate leadership to increase their skills in developing awareness of the processes involved in their divisions. Finally, taking a strategic approach can be especially beneficial for staff functions within companies, as executives are often required to justify their need for resources (Hyland & Varrault, 2003). The case study indicates that M&S has suffered a significant loss of sales due to competitor price-slashing, which sparked the strategic decision to break management into business units. It would be a likely assumption that strategic HRM planning, including compensation packages for performers, are not as readily available to the over-achieving unit leader in the short term. Strategic HRM will have a difficult time establishing effective compensatory packages or bonus incentives to drive executive motivation to succeed if financial resources are diminishing. Further, will M&S be able to maintain positive relationships with the new executive leaders if their requests for additional resources are denied due to budget restraints? How will this affect individual motivation to succeed? The business maintains any number of strategic HRM issues based on financial resources alone. A main debate in HRM is nowadays concerned with the relationship between strategic management and employee relations in the firm and therefore strategic HRM focuses on the overall direction of the organisation in pursuit of its stated goals and objectives (Karami et al, 2004). In the case study of M&S, strategic decisions based on financial resource availability and its effect on executive momentum becomes a difficult process to balance. Organisational Restructure 6 Need to Overhaul HRM Relationship to Core Businesses The processes of organisational learning that lead to sustainable competitive advantage are the creation, transfer and institutionalisation of knowledge (Stavrou & Brewster, 2005). From an HRM perspective, adopting a policy that implements regular training, development, and clearly highlighted job expectations aids in establishing the responsibilities of executives. In this case, Marks & Spencer's main goal is to promote sales growth through profit-accountable units. The strategic decision to split the organisation into business units was deemed to take effect immediately after publicly issuing the changes. With three specific individuals put into leadership positions that differed from their previous knowledge, M&S human resources likely did not have enough time to properly analyse and classify job descriptions and productivity expectations for the new executives. What this creates, then, is a level of uncertainty regarding staffing, accountability, incentives and labour issues in regards to available financial resources. Secondly, the new business unit executives are likely facing pressure to rapidly promote sales growth within their units and, with analysts and shareholders publicly stating they are unimpressed with the changes at M&S, the stress levels in the executives to surpass overall expectations are liable to be excessive as they are both internally and externally under the proverbial magnifying glass as the business and external influences await immediate return on human investment. Further, by failure to adopt a new chairman prior to implementing sweeping changes, Marks & Spencer's new business units may face further operational changes after the chairman exerts his or her influence on the organisation; adding more uncertainty to the unit leadership. The main Organisational Restructure 7 causes of job-related stress are time pressure, fear of losing a job and deadlines (Mathis & Jackson, 2003). It is a significant function of human resources management to offer job-related guidelines and managerial support/motivation for executives, especially those in high-profile, stressful positions where their focus is to rapidly increase profitability. In the case of M&S, their immediate institution of the new business units was likely a somewhat desperate attempt to boost profits, however, failure to select a new chairman and shifting management to profit-accountable positions indicates the business was mainly focused on strategic positioning, but failed to address the impact on its employees. It may also be argued that the business was looking to remove public perception of total business failure by making certain executives accountable for lost profits; thus maintaining corporate image in case of profit failure. Regardless of scenario, Marks & Spencer needs to dramatically improve its HRM policies in order to promote business unity and establish clear goals for each unit leader above and beyond profitability. Medium Term Suitable HRM Approach Needed at Marks & Spencer In order for a business strategy to be successful, the condition must be fulfilled that it should be congruent with HR practices that promote the appropriate patterns of employee behaviour (Brand & Bax, 2002). In this situation, strategic leadership is somewhat demanding superior performance on behalf of the new executives that generate increased profit through customer-oriented units. Marks & Spencer must analyse all of the factors involving each business unit, including financial capabilities, training and development initiatives and methods to remove levels of uncertainty about Organisational Restructure 8 executive expectations; this involves a well-established job description to reduce stress levels. In the medium term, HRM should use a benchmarking approach that assesses capabilities by comparing the firm's activities or functions with those of other firms (Gomez-Mejia et al, 2005). The sudden implementation of business units within Marks & Spencer is not a new concept to many retail businesses and, likely, established companies that have found success in similar units could create a M&S template for appropriate HR policies that align strategy with motivation. Marks & Spencer is somewhat inexperienced in human resources under this business unit structure and could benefit from an external analysis of HRM practices of other organisations. By analysing the strategic successes of competing businesses, M&S can establish workable compensation incentives, training and development programmes, as well as reduce some of the uncertainty behind workable job designs in each unit. Further, in an attempt to reduce some of the executive pressures to succeed under external and internal scrutiny, the business must clearly highlight all of its strategic objectives and how each manager will be specifically involved in the processes. Proper knowledge distribution is a role of HRM and each unit leader must be continuously notified of available financial resources and staffing capabilities to satisfy business objectives. As part of the HRM process, considering the executives are being compelled to boost sales rapidly, establishing a continuous feedback mechanism for individual productivity analysis is crucial to establishing esteem in their new unit roles. The target of the business is to gain a competitive advantage in the UK retail market and only HR tactics that adequately reward executives for aiding in that strategic goal will Organisational Restructure 9 generate increased motivation to succeed. In order to make compensation effective, human resources management must be actively involved in the activities of the unit executives and point out opportunities for individual development. The best HR practice that can satisfy all of these initiatives is to establish an executive-level performance management system that links organisational strategy and creates suitable outcomes based on individual executive success. The performance management system identifies whether executives have met expected performance levels, evaluates opportunities for improvement and then rewards or disciplines based on continuous feedback. Because all of the issues facing Marks & Spencer involve direct performance by each unit leader, the only workable system that can affect all of its potential HRM problems is this system. Measuring overall performance of an executive is not something that can be done without routine monitoring (as results of productivity take a measurable amount of time) and the performance management system is the medium term solution. If, in the mid-term, Marks & Spencer witnesses productivity breakdowns within specific business units, the performance management system allows proactive assessing managers the opportunity to notice trends in executive failures and address the problems before the issue causes long-term problems. Further, by having this feedback mechanism in place, Peter Salsbury (chief executive) can stay in continuous contact with all of the business leaders to offer support should any staffing or operations issues arise needing correction. As mentioned, the stress levels faced by each executive are likely driven by the pressure to boost profits (both internal and external) and rewarding unit leaders for exceeding productivity expectations will satisfy both the executive and Organisational Restructure 10 the external stakeholder in the medium term, as it will show efforts at enhancing profitability within each unit. Further, public acknowledgement of leadership success within individual units is a reward in itself and may satisfy each executive's need for perceived job security and receipt of benefits based on performance levels. Once these methods have all been established, Marks & Spencer can guarantee a higher level of return on human investment and align the business unit leaders to work toward satisfying organisational goals effectively. Organisational Restructure 11 Bibliography Beardwell, Holden and Claydon. (2004). Human Resource Management – A Contemporary Approach. Prentice Hall: Case Study M&S. 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