Strategic Human Resources Planning for Stonewall Industries - Case Study Example

?Stonewall Case study Define and explain the significance of the term ‘derived demand’ as it applies to Strategic Human Resources Planning. Derived demand is the demand for a factor of production that depends on the demand for the good that uses (Sloman, 2006, p.234). It basically signifies the interdependency between the demand of a commodity and its factors. Derived demand carries substantial importance in strategic human resource planning, as its aim is finding the best fit between human resources and organizational business strategies. Human resource planning focuses on identifying current and future human resource need in order to achieve its goals. So in order to plan the human resource need for a particular project, one should be aware of the fact that labor, being a part of factor of production, can also go through significant change in demand condition depending upon the changing demand of the commodity in that particular project. 2. Explain ‘derived demand’ as it applies specifically to Stonewall Industries. Stonewall Industries Limited is a construction material company that focuses more on wallboards. Therefore, whatever factors influence the demand of construction, will in turn affect the demand of construction material. However, in case of Stonewall, the house construction rate and interest rate derive a demand for its construction material. If, due to immigrants, number of constructions increases then demand of construction material will also increase. On the other hand, if the interest rates rise, then funds available for investment will decrease, which means that capital will decrease, hence resulting in decreasing demand of construction material. 3. The Senior Executive Team at Steelroc has to consider a number of environmental factors that impact on its Human Resource’s planning activities. Describe these environmental factors and explain their impact. The environmental factors that can impact the human resource planning activities are political, economic, inflation, social, technology, suppliers and competitors. (a)Political factors: it refers to government policy such as the degree of intervention in the economy. Political decisions can impact on many vital areas for businesses, such as the education of the workforce, the quality of construction material etc. (b) Economic factors: The economic factors comprise of interest rates, taxation changes, economic growth, inflation and exchange rates. It can impact business in different ways, for instance the higher interest rates may discourage investment because it costs more to borrow. (c)Inflation: It may give rise to higher salary demands from employees and also raise the costs, for instance higher national income growth may boost demand for a firm's products. (d)Social factors: Changes in social trends can impact the demand for a firm's products and the willingness of individuals to work. If we say that population of Canada is ageing, then we will also consider that more old age homes would be required, which in turn would require construction material. (e)Technological factor: New technologies create new products and new processes. It is also capable of reducing costs and improving quality and it also leads to innovation. These developments can benefit consumers as well as the organizations providing the products. 4. Identify and explain the various techniques for forecasting labor supply and labor demand. What can organizations do in the short run when they recognize a gap in which supply far exceeds demand? What could Stonewall do in this situation? The techniques that can be used for forecasting labor demands are trend analysis and management forecast. (a) Trend analysis: in which labor requirements are forecasted on the basis of some organizational index. (b)Management forecast: are the opinions of experts, supervisors and sometimes the skilled labor as well, regarding the organizational labor forecast. The supply of labor can be forecasted by different techniques including staffing tables, Markov analysis, and succession planning. (a) Staffing tables: organizational jobs along with employees currently occupying the job are graphically represented. (b)Markov analysis: percentage of employees who remain in firm’s job from one year or next, as well as proportion of those who are promoted, demoted, transferred or exit the organization. (c) Succession planning: a process involving identifying, developing and tracking key individuals for executive positions (Bohlander & Snell, 2009, p.62-66). When organization finds out the gap between the supply and demand of labor, it should start evaluating its labor competences and find the best fits for the organization. In short run, decreasing the labor wage will not be a good option, because in doing so, company might lose its competent staff as well. So, the only way out is to lease employees to other company or to its subsidies. It is, however, a temporary solution. In order to permanently solve the root cause, company should opt for sensible downsizing and later, it should provide training to the employees to help them polish their skills. Stonewall should not have hired a bigger staff for Mississauga, because if the head count of employees was less, then average hourly rate could have increased, resulting in perfect number of satisfied staff. It would also have eliminated the need of layoffs and mergers. Alternatively, Stonewall Company could have rather gone for employee transfers between its branches. At first, employees performing below standard in Vancouver (where average hourly rate is maximum) could have been transferred either to Montreal or Winnipeg (where average hourly rate is minimum), or vice versa for those performing well. Later, if performance of transferred employees remained stagnant, then the layoffs would have been justified. 5. In 1982 it seems the company will have to downsize. What are the factors that are forcing the company to make that decision? In 1982, factors that forced the company for downsizings were the decreasing demand of house construction and the increasing interest rates and unemployment level. (a) Demand of house construction: Increased inflation has curtailed the demand of house construction, because inflation decreases the buying power of consumer. (b) Interest rates: High interest rates are not stimulating investments, due to which capital is decreasing. (c) Unemployment level: Inflation has resulted in massive amount of layoffs around the world. The prices of everything including raw material, machinery and land etc. are rising, which in turn results in increased price of finished products. So, out of company’s capital, more percentage is spent on the finished commodity and less is left to pay out for wages, which in turn results in downsizing. 6. What alternatives should the company explore prior to making its downsizing decision? Stonewall Company should explore alternatives prior to making its downsizing decision. One way to do so is by employee transfer to either within company’s subsidies, or to other companies. Later, if performance of transferred employees remains stagnant, then layoffs with proper reasoning will be the only way out. Information regarding downsizing should be provided to the employees as it is not only an employee’s right to know about it at least 3 months prior to layoff, but it is also constitutes the company’s foremost duty to its employees. 7. Which plant should the company downsize? Why? I believe, Stonewall Company should opt for downsizing the Montreal plant. The reasoning behind it is that the Quebec is relatively small province as compared to others. If at times, more supplies are needed, Mississauga plant can easily transport it to Montreal because it is only on a 6 hours drive. Moreover, average hourly rate in Montreal plant is less as compared to others. So, in order to avoid the negative impact on the remaining employees, Stonewall can increase the average hourly rate, which would easily motivate the existing employees. 8. Explain, in detail, the implications of the downsize decision. Downsizing achieves its goal in the short-term. It improves an organization's profit line by reducing expenses and increasing productivity. It also boosts the sales and competitive advantage etc. Downsizing is sometimes necessary for organizations in order to avoid bankruptcy. The survivors of downsizing are encouraged to improve their productivity, but they constantly live in a state of fear of losing their jobs. Downsizing results in drastic decrease in loyalty towards the downsized company; survivors of downsizing might feel they are likely to be the next targets. The creative thinking and organizational innovation can be reduced, due to the fear of mistakes that many survivors can make. Moreover, in long run, organization suffers from mass confusion, psychic depression, and lack of key ingredients for growth and leadership such as energy, loyalty, creativity, time management, and teamwork (Hunter, 2007). 9. In 2008 British Wallboard, the parent company of Stonewall has seen enough of the volatility in the Canadian construction materials market and sells the company to a competitor, US Corp. Its subsidiary, Canadian Wallboard, and Stonewall will merge into one organization. What are the benefits of the merger to British Wallboard? US Corp? Canadian Wallboard? Stonewall? Mergers can have both a positive and a negative impact on the company’s growth, productivity, profits and market share. British Wallboard that is considered to be the parent of the company Stonewall had to face a devastating downfall in consumer demand of construction material in Canadian market. Hence, making decision of selling the company was the right thing to do before going bankrupt. If it would have prolonged this decision, they would have gone bankrupt; loss of goodwill and British wallboard would have soon become history.US Corp was the company that bought British Wallboard and the benefit it gained was the increased market share, along with a decrease in competition. Canadian Wallboard was a subsidy of US Corp. It was merged with the British Wallboard subsidy. The benefit it gained was the market share of Stonewall, as Stonewall had its plant in every province of Canada. So, it became easier for Canadian Wallboard to target and distribute its product anywhere in Canada. If Stonewall Company, being a subsidy of British Wallboard, is merged with Canadian Wallboard, the benefit Stonewall would gain from it would be that many employees would retain the same job rather than going jobless. 10. What are the risks to each of the four companies of this merger? There are a number of risks that are associated with mergers. From British Wallboard, the employees might feel demotivated about the merger and they might not give it their best shot. Corporate culture incompatibility might arise among employees. For US Corp, employees might feel dissatisfaction regarding the merger. Business and IT system can be incompatible. Delayed decision due to break up of authority can be another risk that could be faced. Canadian Wallboard might neglect its existing business and may start focusing on acquired business. Another loophole could be that they might have done insufficient research regarding the acquired business. The risks associated with Stonewall are that it might suffer from employee demotivation, culture incompatibility and it might lose its key skilled employees. 11. You have been assigned to head the consulting team that will lead the transition. What advice are you going to give the companies so that the merger has the best chance of success? For all the companies, the foremost thing that should particularly be taken care of is open communication regarding merger. British wallboard should inform its employee regarding the merger prior to it. It should also provide employees with a sensible rationale regarding the need of mergers, which would in turn decrease level of demotivation.US Corp should also provide a detailed information regarding mergers to its employees. It should check the compatibility of its business and IT systems with that of the acquired business. In addition to that, US Corp should finalize the decision making tree prior to mergers. For Canadian wallboard the main focus should be their business, but along with that it should also keep track of acquired businesses. Extensive research should be done before acquiring a business. For Stonewall, providing the employees information regarding the merger, at least 3 months prior to it, is necessary, so that they can look for other jobs if need be. Assuring the skilled employees regarding their job in the new company is also required in order to increase motivation and trust. REFERENCES 1. Bohlander G. & Snell S., 2009. Managing Human resource. 15th ed. Canada: Cengage Learning. 2. Hunter S.2007. The Negative Effects of Downsizing. [Online] Available at [Accessed on 1st March 2011]. 3. Sloman J., 2006. Economics. 6th ed. India: Pearson Education Ltd. Read More