Business Strategy of Ford - Case Study Example

Executive Summary The role of human resource management at Ford is one of strategic partner, administrative expert, and consultant (managing all of the organizations people related processes strategically). It is the job of hr management in to recognize that decreased turnover, higher employee morale, and involved employees in the decision making process are all optimal in providing key leverage in Ford’s strategic plan. Management at Ford integrates strategic hr management with the organizations strategy formulation. This means that management has searched the organization and its environment for opportunities and initiated projects and decisions to bring about changes that are both advantageous and competitive for the organization. Through this integration, HR policies must "cohere and be accepted across all company policy areas and across all hierarchies in the company". These same HR policies had to be turned into practices that were used by both managers and employees as part of their everyday work at Ford (Berman, E. M., & West, J. P., 1995). Business Strategy Review The management role at Ford has changed tremendously from being a mostly personnel function, consisting primarily of a lot of paper pushing, hiring and firing, to being totally responsible for the maximization of "human capital effectiveness". Which primarily creates a better-trained, more flexible workforce that will add more to the bottom line. Peoples Bank went through some organizational restructuring in order to stay competitive in the market. As a result of the changes that were made in Ford’s system, HR Management had to do research and analysis in order to scan the new environment to see what types of employees would be needed with the "new strategys skill and organizational requirements. This was a use of HRs information management skills, which was followed by HRs integration and change skills to manage the organizational interfaces, assess the organizations skills (or the current values of the banks human resource investment), set priorities, anticipate the future, and facilitate the changes. This is an excellent example of HR Managements role being at every level of the strategic planning process (Clinton, R. J., Williamson, S., & Bethke, A. L, 1994). The sum of the environmental factors that facilitated the actions and changes in each of the organizations was as follows: The rapid rate of business change; high uncertainty; rising costs; increasing competitive pressures on the bottom line; the legal environment; increasing demands for new skills through education and retraining; increasing multinational competition and collaborations; and all the rapid technological changes (which is a huge factor). All the new technology causes increased competition by providing vast amounts of market data. This data allows companies to quickly collect, analyze, and interpret changing and emerging customer needs. This affects the rate of business change. Technology at Ford also changes the way the work is done; this increases demands for new skills through education and retraining. As a result the ability to access and share information creates a growing need for less hierarchy and more employee empowerment. A common theme running through all these environmental factors is a cost control orientation, which means that organizations (as it relates to remaining profitable and competitive) have a concentrated focus on containing costs. This can most often be done through planning and planning can be done through (first) environmental scanning. Another environmental factor is reengineering, which is also called process innovation, core process redesign, or business process reengineering. Reengineering is directed at achieving large cost savings by eliminating unneeded activities and consolidating work. This was done at Ford, as they eliminated several middle management jobs/positions, and replaced those jobs with better-qualified individuals on a local wage policy. The type of service desired by customers is also a major environmental factor. At Ford, the environment changed from a product orientation, to a market orientation where the market (or what people wanted, demanded, and were buying and using) demands where determined first and then the products were "developed to serve the market". There are several managerial trends used at Ford. One well-known managerial trend is Total Quality Management, also known as TQM. In a strategic context, TQM is probably most accurately categorized as a tactic for carrying out strategies requiring high levels of product or service quality. "TQM principles emphasize the following: a) articulation of a strategic vision, b) objective and accurate measurements, c) benchmarking (evaluating the quality of human resource programs, activities, and impact as well as a means of identifying areas in which resources should be concentrated) d) widespread employee empowerment and team building, e) striving for continuous improvement, f) emphasis on a systems view of quality which conceptualizes quality-related activities as being highly interdependent, g)leadership committed to quality, and h) great emphasis on customer satisfaction. Another trend used at Ford is the increased use of work teams, which is defined as a cohesive group assembled to address a problem, manage a process, or work to improve productivity. Teams can be formed from individuals doing the same work (a functional team) or from different work (a cross-functional team). Also, (as in the Ingersoll-Rand example) there is trend towards product development teams, which is a kind of cross-functional team. They bring together all functional areas involved with creating new products: engineering, production, research and development, marketing, purchasing, and so on. A key advantage with teams is that they help organizations and individuals depart from traditional, and bureaucratic, notions about how work is organized, and who is responsible for what. Teams exert a powerful influence on individuals by setting norms regarding appropriate work quantity and quality (Hackman, J. R., & Wageman, R., 1995). At Ford, positive results from group influences are more likely when there are rewards for group efforts, and the group has autonomy and control over the work environment. Another trend is managing through employee participation and empowerment. This encourages the decentralization of decision-making and gives broader worker participation and empowerment in controlling their own work process. Research has shown that participation increases both employee satisfaction and productivity. Then there is strategic salary planning, which includes incentive pay and pay for performance, and having wages that are higher than that required by the market. This salary related trends allow employees who are responsible for enhanced levels of performance and profitability to share in the benefits. If properly implemented, they can align the interests of employees with those of other shareholders. Such employees will likely take a long-term view of the organization, its strategy, and its investment policies. At Ford, employee empowerment can provide a valuable source of competitive advantage to be considered in strategic decision-making. Empowerment can improve productivity in two ways. First, it can strengthen motivation by providing employees with the opportunity to attain intrinsic rewards from their work, such as a greater sense of accomplishment and a feeling of importance. Workers then become self-motivated. Second, employee empowerment can improve productivity because the process leads to better decision. Decisions are better because they are made by employees, and employees have a more complete knowledge of their work than do their managers. Furthermore, employees are more likely to accept (and thus implement) decisions when they have participated in the decision-making process. An organizations competitive advantage rests with managing and developing its "knowledge capital". Knowledge capital refers to the collective economic value of the organizations workforce. It encompasses the organizations ability to stimulate employees to develop new approaches to cutting costs and increasing revenues, and to discover new products and services. Examples of this include information sharing which provides an informed basis for employees to appreciate how their own interests and those of the company are related, and thus provides them with the information they need in order to do what is required for success in various business related situations. There is also employee ownership with things such as shares of company stock and profit-sharing programs; and informal participative decision -making programs, where managers decide just how much decision-making authority employees should have and managers and subordinates make joint decisions on a day-to-day basis (Giroux, H., & Landry, S., 1998). Human Resource Strategy Ford has an interesting human resource strategy. First, all managers are human resource managers. Secondly, employees are viewed as assets. Third, human resource management is a matching process, integrating the organizations goals with employees needs. Employees should receive satisfaction equal to that of company. The major goals of HRM at Ford are to develop employees into an effective workforce. Development includes training and performance appraisal. Training and development represent a planned effort by an organization to facilitate employees learning of job related behaviors. Budget Ford spends nearly $100 billion each year on training. Training may occur in a variety of forms. The most common method is on-the-job training. In on-the-job training, an experienced employee is asked to take a new employee under his wing and show the newcomer how to perform job duties. IJT has many advantages, such as few out-of-pocket costs for training facilities, materials, instructor fees and easy transfer of learning back to the job. Other frequently used training methods include orientation training, classroom training, computer training, and discussion groups. When Advanced Microelectronics, Inc. a fast-growing computer services company, let its training programs lapse, productivity sagged and turnover soared. Departing employees told CEO of the company they were leaving because they felt they were getting out of date or not keeping up with changes. The CEO responded by reinstating the training program and expanding it to include bookkeepers and administrative workers as well as computer-repair and network-service technicians (Emery, C. R., Summers, T. P., & Surak, J. G., 1996). Performance Management Employees and managers at Ford are increasingly appreciating the importance of training programs as they expect workers not only to have skills related to specific tasks but also to demonstrate the ability to think critically and solve problems. Most companies are increasing training budgets. In addition, they are experimenting with a variety of new training approaches. One of the most popular is the concept of cross-training, which teaches employees multiple skills so they can perform a number of different jobs, thus providing variety for employees and enabling companies to quickly adjust to changes in staffing needs. Another approach at Ford, integrative learning, uses team exercises to establish and reinforce teamwork habits. Promotion from within helps companies retain and develop productive employees. It provides challenging assignments, prescribes new responsibilities, and helps employees grow by developing their abilities. Promotion from within is one of the development approaches. At Ford, performance appraisal is another importance technique for developing an effective workforce. Performance appraisal comprises the steps of observing and assessing employee performance, recording the assessment, and providing feedback to the employee. Managers use performance appraisal to describe and evaluate the employees performance. During performance appraisal, skillful managers give feedback and praise concerning the acceptable elements of the employees performance. They also describe performance areas that might need improvement. Employees can use this information to change their job performance. Performance appraisal can also regard high performers with merit pay, recognition, and other rewards. However, the most recent thinking is that linking performance appraisal to rewards has unintended consequences. The idea is that performance appraisal should be ongoing , not something that is done once a year as part of consideration of raises. Kelly Allan, a senior associate of Kelly Allen Associates, Ltd. a consulting firm bases in Columbus, Ohio, outs it this way: "A raise is a transaction about how much money you or I can get. Feedback is a conversation about how much meaning you and I can create." (Connor, P. E., 1997). Conclusion and Reccomendations Generally, HRM professionals at Ford concentrate on two things to make performance appraisal a positive force on their organization: (1) the accurate assessment of performance through the development and application of assessment systems such as rating scales and (2) training managers to effectively use the performance appraisal interview, so managers can provide feedback that will reinforce good performance and motivate employee development. To obtain an accurate performance rating, managers must acknowledge that jobs are multidimensional and performance this may be multidimensional as well. For example, a sports broadcaster may perform well on the job-knowledge dimension, but may not perform as well on another dimension, such as communication. At Ford, human resource managers must find, recruit, train, nurture, and retain the best people. Human resource programs are supposed to be designed to fit organizational needs, core value, and strategic goals. HRM is more important today than ever before. A mix of economic, demographic, and social factors has led to an excessively tight labor market in most areas of the United States. Without the proper personnel, the brightest idea or management trend is doomed to failure. For these reasons, it is important that human resource executives be involved in training, development and appraisal of their fellow employees. Examples A good example of the use of this model is the pharmaceutical industry. Internal rivalry as it exists in the pharmaceutical industry is reviewed. The great emphasis on quality and longevity of the human life has spurred on tremendous investment in R & D centers by all the global pharmaceutical companies. Pharmaceutical companies have to work harder at maintaining their status in the industry. It is estimated that it costs approximately $500- $800 million US dollars to introduce a new product into the market. (King, 2004) Intense rivalry to launch new products first into the market exists in the pharmaceutical industry as it is estimated that any drug generates the highest revenue in the first three years of its market introduction. The pharmaceutical industry has experienced extensive mergers and acquisitions worldwide in the past three decades. In the past, this industry was characterized as very fragmented. Mergers and acquisitions have however creating a number of ‘mega-companies’ with tremendous capabilities and resources. Bigger competitors in the field are now threatening an industry, which in the past had never been subjected to takeover bids in the stock markets. Examples of takeovers in the past 10 years are Pfizer with Warner-Lambert and Glaxo Welcome with SmithKline Beecham. If the industry continues to expand in this manner, extensive instability and demoralization will occur in the workforce. Serious price competition and short life cycles of products in the pharmaceutical industry has seriously impacted profits generated. Fewer potential pipeline drugs, stringent clinical trials and testing have increased the rivalry. Depending on the industry the barriers to entry also impact the organizational strategy. The airline industry for example, used to have a high barrier to entry prior to 9/11. In the aftermath of 9/11 some of the barriers to entry have reduced. Airport terminals have freed by virtue of many airlines closing down or reducing services and can be procured for use much more easily. The cost of obtaining planes has also dropped due to general industry slump and the surplus of plans that resulted as a result of many airlines going bankrupt around the world. Deregulation of the internal airline industry has also helped any foreign investors from owning 100% of any existing domestic airline industry or starting a new airline industry in the region. The barriers have lowered very much compared to the 20 years back. The airline industry however, requires economies to scale to be profitable in the long term. To build a sufficient infrastructure requires time and capital investment. These factors may result in creating a monopoly in the airline industry. Buying power of the customer is also an important consideration. The nature of the item and the cost of the product influence buyer behavior. In the airline industry for example low cost and value travelers are significantly affecting airline profits. The wide variety of options and the concepts of “bucket-shop” dealing with travel agents and bulk purchasers of airline tickets are also impacting the profits that airlines can make in modern times. During the 1990’s, competition was rampant and the aviation industry worked hard at offering their clientele all the luxuries and in flight comforts, routes and the number of flights. This has however changed. Southwest Airlines introduced many of these changes in the market. Southwest Airlines is a success story at a time when most airlines are struggling to keep their heads above water. Southwest Airlines defined its strategy—low priced travel cost, limited passenger service and reliable services. Buying power rests in the hands of the populace. And while the individual purchase volume is low, as a group the volume is great. Buying power is also dependent on the culture and economy of the region. Brand loyalty plays an important role in what prompts the consumer’s decision to purchase a product. For example, medical guidelines and recommendations have always been one of the major drivers of any pharmaceutical product. Recently, with the era of the Internet and the ease of access to information regarding pharmaceutical products and pharmaceutical companies, has empowered end users i.e. patients role in choosing their medicine, and is becoming more and more important. A well-informed patient is increasingly becoming a decision maker as regards his or her choice of prescription drug. As such, the buyer of the pharmaceutical product can evaluate choices and benefits of the product. Supplier power also affects the industry strategy that can be used. Flexible union contracts of Southwest Airlines as compared to other airlines in the industry have helped the company generate profits for itself and its workers. There are tremendous demands on all the airline companies involved to maintain the logistics accurately. From the ground staff at airports, to the maintenance and service personnel, all have as important duties in keeping the aircraft in flight as the pilots. Labor cost and fuel cost are the most expensive components of operations cost for an airline industry. The labor component is very influential in the airline industry due to the special expertise. The ability of any market to supply these needs also impact the industry and the organization. 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