Smith Radiators Organizational Strategy - Essay Example

Smith Radiators’ Case From the case, Smith Radiator’s organizational strategy is typical of a reactor. The primary reason that leads one to this conclusion is that Smith Radiators does not seem to have a defined business strategy. One may initially presume that Smith Radiators pursues a low-cost strategy because the organization uses cost reduction strategies, low wages, and layoffs, to maintain market share (Case 244). However, Jeff Brown’s letter to Smith informs us that other suppliers could supply radiators at a lower price than Smith Radiators. On the other hand, even though the organization had built a reputation for manufacturing reliable radiators, one cannot categorically state that Smith Radiators pursued a differentiation strategy. We cannot detect a deliberate management drive towards product improvement or innovation over the 30 or so years that it has been in existence. Secondly, it is noted that Smith Radiators has to be prompted to adjust its organizational strategy due to the external pressure from Automobiles of America, Inc. (AAI) – the company’s largest customer. Smith Radiator’s implied management failure to articulate a viable organizational strategy and its implied adherence to the particular strategy-structure relationship even though it was no longer relevant to the change in environmental conditions over the 30 years that it has had a relationship with AAI are consistent with factors that cause firms to resort to reactor strategies (Miles and Snow 82). That which we can detect though is that Smith Radiators’ HR practices are geared towards direct, process-based control in which the focus is on efficiency and cost containment. This strategy would have been a perfect fit if the organization pursued a low-cost strategy. However, since we cannot categorically state that the organization pursues such a strategy, we cannot conclude that its HR strategy is a fit. Smith Radiators worker’s skills are not particularly unique to the firm and thus cannot serve as a differentiating source of uniqueness. The organization, therefore, exploited the fact that it has generic key employees to negotiate the “no layoff, no strike” policy in exchange for job security but with low wages with the union. Smith Radiators’ HR strategy and practices have so far enabled it to survive in the competitive market as it has been able to keep its costs low. The challenge now though is that to meet the new AAI’s supplier requirements, Smith Radiators has to re-think and reformulate its HR strategy to fit the new Just-in-Time (JIT) requirements. As is, Smith Radiator’s HR practices will not enable it to effectively execute JIT because the firm lacks workers who can perform multiple tasks, it does not encourage employee involvement in decision making and so on. To build the HR strategic plan that Smith Radiators should use to meet AAI’s Just-in-Time (JIT) requirements we utilize the human architecture proposed by Lepak and Snell that provides a basis for matching HR strategy with specific employee groups. Lepak and Snell used to value and uniqueness of human capital to judge their strategic potential. 400 out of 475 employees at Smith Radiators are unionized production workers. Our HR strategy will focus on these “generic key employees” – where generic here implies that these worker’s skills are not particularly unique to the firm and therefore cannot serve as a differentiating source of competitiveness (Seyedjavadin and Zadeh 9). The net sales figures in Appendix 3 (case 252) steadily increased from US$ 36 million in 1986 to US$ 50 million in 1990 implies against a relatively low increase in net income. This could depict that Smith Radiators is experiencing growth but that it has been unable to contain its cost relative to its growth. We are informed that Smith Radiators employed 20 percent more staff than it needed. Assuming that with growth the company employs more the extra 20 percent could be a major reason for the low increase in net income. The first cause of action for Smith Radiators would, therefore, be to conduct an HR audit to uncover where and what areas have the extra 20 percent staffing. JIT, in essence, is a cost reduction strategy and therefore by implementing it Smith Radiator will be adopting this business strategy. This means that Smith Radiators will have to do away with this 20 percent extra staffing and seek to mitigate the high staff turnover through the other techniques described in the sections below. With several American companies moving towards JIT in the short-term there will be a shortage of JIT-skilled labor. Retaining its newly trained JIT workers will, therefore, be a priority. In the long-term, the huge Detroit auto-industry labor pool will adjust to meet the new labor demands. Since Smith Radiators has got only 18 months to meet the requirements of AAI, it has to focus on implementing strong short-term HR strategies to retain key employees that it shall train on JIT. Before it even thinks about recruitment, Smith Radiators needs to conduct a job analysis for every role in the organization so as to re-align them to the goals of achieving AAI certification within 18 months. After the job analysis, the HR department can then get to develop new job descriptions that shall define duties and responsibilities for employees as well as for job evaluation. One strategy that Smith Radiators could deploy so as to increase the flexibility of its workforce is job enlargement. This would simply involve adding related tasks so that its worker's jobs skills increase as well as their responsibilities and remuneration. Smith Radiators currently prefers using employee referrals for recruitment. We believe that the firm should continue using this approach because recent studies have demonstrated that employee referrals generally produce the best candidates (Robbins et al.). With employee referrals, the company is assured of pre-screened applicants because current employees believe that their reputations with the firm will be reflected in the candidates that they recommend. The downside to referrals is that they do not generate a diverse mix of candidates for selection. Smith Radiators could, therefore, employ the services of an external recruitment firm to provide a few more candidates. The company together with the recruitment firm can then work together to select the final candidate who seems to best fit the meet the new needs of the Smith Radiators. So far Smith Radiators has been taking training its new staff via on the job training. This technique is convenient and cost-effective. However, the lack of both a training department and training manuals implies that staff training ends up being asymmetrical, in the sense that staff gets competencies relative to who their trainer is and how they train. Smith Radiators must find a way to standardize its training program so that it can easily audit the jobs skills of every staff member at any given moment in time. The organization should also develop a skills matrix tool so that management can have a simple visual tool to aid in resource planning. Since JIT requires workers who can perform multiple tasks, the skills matrix will aid identifying training individual employee training needs. The skills matrix can also be used as a daily planning tool to deploy staff where they are most needed (“People management skills matrix” 10), which supports JIT production. Smith Radiators have been given 18 months to achieve AAI certification. Considering that AAI is Smith Radiator’s largest customer and a key account, Smith Radiator’s has to incorporate this goal into its organizational strategy. This implies that Smith Radiators must now align even its HR strategies towards achieving that goal. With the organization keen to achieve the AAI certification, the best performance management appraisal method to use would be management by objectives (MBO). MBO emphasizes ends rather than means (Robbins et al.). This method, therefore, allows managers to choose the best path for achieving their goals – which in this case would be AAI certification. Under MBO, Smith Radiators will review its workers on how well they accomplish the specific set of objectives that have been determined to be critical for the successful completion of their jobs, which affect the overall success of the organization with regards to achieving AAI certification. Smith Radiators is paying the least wages in comparison to its rivals (Case 246). The organization will have to revise its wage policy especially if it is to achieve AAI certification which requires JIT delivery and suppliers that seek continuous improvement, two attributes that can only be achieved by a highly motivated and multi-skilled workforce. Smith Radiators will have to ensure that they retain their staff longer than it can maximize its returns from the training and development that it has taken them through. Also, the organization runs a bigger risk of losing more after it has trained its staff to be JIT-compliant than now. Smith Radiators could do this by raising the employee benefits through facilities such as insurance cover; negotiate mortgage rates for its staff with lenders, scheme loans and so on. As an industrial facility, Smith Radiators would not be operating if it has not passed the American Occupational Safety and Health Administration (OSHA) regulations. OSHA essentially ensures that Smith Radiators complies with the statutes. The employee reaction to the JIT implementation raised pertinent issues at Smith Radiators such as the relationships between workers and their supervisors. Supervisors did not want workers to be involved in decision making, and yet this is a critical element for JIT implementation to succeed in any organization. Smith Radiators could begin by creating employee participation teams. The more employees interact with team members, the greater they feel towards the company (Barnes 8). Then the organization could also enlighten its employees about its long-term goals, strategy, and activities so that they become more knowledgeable and as such can contribute towards achieving those long-term goals and feel valued. Additionally, Smith Radiators should put in place mechanisms for finding out what its workers care about or even what they think of the employer. Adams (1) says that an employer who is honest, well-intentioned and who genuinely seeks to address issues that cause discomfort to his/her employees is less likely to have an acrimonious relationship with the unions. It will be difficult for Smith Radiators to appease the unions after several years of having an adversarial relationship. One strategy that Smith Radiators could pursue is to increase its internal employee involvement programs. Several researchers cited by Adams (11) show that employee-involvement programs constrain unions from establishing or having power over organizations. Employees often reach out to unions because they feel left out or that their concerns are not being looked into. Having worker representatives attend senior management meetings and seeing tangible evidence of their concern being addressed improves worker confidence in the involvement programs and lessens their need to have union representatives. Works Cited Adams, William. “Unions Work Only If Management Doesn’t.” Manufacturing & Technology News. Web. 12 Nov. 2011. Barnes, Suzin. “Tips to improve employee relations.” Austin Business Journal. 29 Mar. 1998. Web. 12 Nov. 2011. Lepak, D. P, and S. A Snell. “The human resource architecture toward a theory of human capital allocation and development.” Academy of Management Review 24 (1999): 31-48. Print. Miles, R. E, and C. C Snow. Organizational strategy, structure and process. New York: McGraw-Hill, 1978. Print. “People management skills matrix.” 2011. Robbins, Stephen P et al. “Chapter 9 - Human resource management.” Fundamentals of management: essential concepts and applications. 4th ed. Pearson Education, 2005. Print. Seyedjavadin, Seyed Reza, and Mashallah Hossein Zadeh. “HR strategy and its aligning with organizational strategy and human capabilities.” IJMS 2.1 (2009): n. pag. Print.  Read More