How Smash Was Pharmaco in Attainment a Balance between Its Human Resource and Business Strategies - Case Study Example

How successful was Pharmaco in achieving a good fit between its human resource and business strategies That Pharmaco needed to conduct a restructuring should not be deemed an inherent failure but instead a natural part of business. Changes like restructuring "have become the normal in the modern business environment" (Noe, 2004, 275). In fact, specialists within human resources are needed to deal with issues involving not only restructuring but international business structures. Employee decisions traditionally evaluated by corporate leadership are shifting to human resource management's more tailored authority. "Human issues arising from the restructuring of multinational corporations are being delegated to HR for studay and implementation" (Fitz-Enz, 2002, 4). Therefore, human resource management should be prepared to deal with such challenges. Unfortunately, empirically, it has been a common practice to cut the human resources department first to save money and resources when a company is experiencing difficulty. "And when companies were downsizing and restructuring, human resource capabilities were the first thing cut" (Losey et all, 2005, 13). Such poor leadership decisions are not forward thinking and result in an understaffed HR department that is not prepared to lead the company's restructuring. In the case of Pharmaco, inefficient human resource decisions couple with poor communication between employees hindered development. Evaluation of the management style of Pharmaco yields information about the company's core values and beliefs. The purpose of the case study was to "appreciate the range of employees and types of job that exist within pharmaceutical companies" (Sewell and Scarbrough, 2002, 182) Pharmaco is a British company, which is important to note because the "pharmaceutical industry is often highlighted as one of the few examples of British manufacturing success in high value added markets" (Sewell and Scarbrough, 2002, 115). The case study tracks the year and a half following the takeover of Pharmaco. Approximately 950 employees were on site, including over "100 in chemical operations", "300 employees in pharmaceutical operations", and "100 employees in industrialisation" and "122 people in quality control" (Sewell and Scarbrough, 2002, 183). Like other industries dependent upon science, pharmaceutical companies need to constantly retrain and innovate in order to achieve and continue to enjoy market competitiveness (Sewell and Scarbrough, 2002, 43). This distinguishes such businesses from other more traditional companies and creates intriguing dilemmas for human resource management. Retention of employees is key as confidentiality is a premium for the field. Temporary workers require human resource analysts to design specific policy and compensation procedure that may differ from that of permanent workers. This inherently creates uncertainty which may be compounded by ineffective implementation or the perception of favourable treatment of one group over another. The first issue to be examined is why these individuals choose to become temporary workers so that their attitudes and effectiveness may be gauged. As David Cenzo and Stephen Robbins (2005) note: If temporaries are employed solely as a cost-cutting measure, the pay and benefits offered to contingent workers might differ from those offered to other workers hired part-time as a result of restructuring HRM, then, must discover specifically what these employees want. Is it flexibility in scheduling, autonomy, or the control over one's career destiny that such situations afford that attracts them Or is it just bad luck, and they are forced into this situation (19) Conflict between temporary and permanent workers must be anticipated by human resource management. If the new workers are given more pay or significant schedule flexibility this can cause concern and anger, resulting in a loss of productivity or even employees choosing to quit. A lesson can be learned from studying the massive restructuring of businesses that took place across the board in 1990's Japan. As one analyst commented: It is said that the result of corporate restructuring in Japan was massive job losses and redundancies in the 1990s. Indeed, looking at the specific reasons for leaving one's job out of all of those unemployed, the number of people who left work involuntarily - for reasons attributable to the workplace or business - rose by almost five times from 320,000 in 1992 to 1.51 million in 2002 (Yoshio, 2004, 1). Employees are not blind to the tension experienced by a company when it is not producing its economic expectations. They are aware of the stress of restructuring because it reverberates throughout the company's hierarchy. However, it is the job of human resources to broadcast the benefits of restructuring. The unemployment faced by Japan during the 1990's restructuring would have been much worse had the restructuring not occurred. Up until now, corporate restructuring has on many occasions been accused of being a great contributing factor to the decrease in employment and the increase in unemployment. However, what has been understood based on the results of this analysis is that while there will be a temporary decrease in employment following the restructuring of a corporation, in the long-term it will not decline as sharply as that of a firm which has not been restructured. However, employees do not benefit from the fruits of restructuring in terms of wages (Yoshio, 2004, 1). While the problems involved with restructuring are generally known, the benefits are often not equally discussed. Human resources should project optimism in the face of such situations. However, when restructuring, success is rarely assured. In fact, often the companies will fail to regenerate lagging economic progress and stop stagnation. These are the stories that fill media awareness and generate panic in the minds of otherwise content employees. As one Canadian professor noted: Restructuring and downsizing are considered to be activities to reduce redundancies, increase productivity and, at least to some degree, redress a firm's financial woes. Evidence suggests, however, that these objectives are frequently not realized. Cascio found that fewer than half of downsized companies reported significant reduction in costs. Less than a third of the companies reported that profits or shareholder returns increased as expected. Moreover, research has found that those employees who survive the cuts (the survivors) typically are less loyal, less willing to take risks, and provide lower levels of service to customers and support to fellow employees (Skarlicki, 1996, 1). In the case of Pharmaco, there was not a significant effort made to generate a communications program within human resources to detect and avoid these potential pitfalls. This lack of communications contributes to instability instead of reassuring employees of a company's future existence. Such a decision may instead make the company's entire future seem in jeopardy. The company's handling of the restructured could have improved its handling of staff insecurity during the organisation. Surprisingly, "very few steps were taken to reduce feelings of continuing job security" (Sewell and Scarbrough, 2002, 185). Pharmaco did employ one strategy to manage insecurity and that was temporary workers. These temps were utilized to act as "a buffer for permanent staff" (Sewell and Scarbrough, 2002, 185) The aim of temporary worker use was to "minimise potential job losses" (Sewell and Scarbrough, 2002, 186). Temporary workers are a significant part of the work force and must demand the interest and attention of human resource professionals. In the United States, "on any given day, 2 million temporary workers are on the job somewhere with no guarantee of employment beyond today" (Ivancevich, 2004, 145). In fact, the prevalence of temporary worker use should be regarded as commonplace. "Organizations must have their skilled staff to hand when required and thus the employment of individuals of temporary, casual, and fixed-term contract to support the core workforce is standard practice" (Maund, 2001, 140). However, in this case, the use of temporary works did not assuage the fears of permanent employees. Rather, it created a new source of tension. Blame for this effect must rest largely on the human resource management professionals overseeing the restructuring. Morale is an important issue during times of growth and change. A resource based view would have definitely benefited Pharmaco's management approach. This view reflects the understanding that a restructuring is not enough to improve competitiveness and that "a shift in firm and/or industry values is needed to affect a turnaround" (Schuler and Jackson, 1999, 43). The restructuring occurred because of economic competitiveness concerns. Management failed to see the necessity of valuing its employees and a similar dynamic took place between ownership and managers. Employees must be understood as a key resource for the company; they are the fuel for the engine that drives progress and productivity. It is always a mistake to assume that employees feel appreciated and open communication between different steps of the hierarchal structure would have helped Pharmaco's transition. The internal focus on people and company process must not be usurped by internal in external considerations like new markets and increasing corporate competition. The company may have benefited from a strategy which offered to pre-existing employees the opportunity for overtime before contingent workers were employed. This would have allowed the permanent workers to have some say in the employment of temporary workers, creating personal responsibility for the company's decision while also offering economic incentive for those interested in doing more. The application of an overtime option is far better than the desire to pay permanent employees more. There is often little financial room within a company going through restructuring to increase pay to its employees. After all, the primary purpose of going through such difficult restructuring is often economic competitiveness. In fact, paying employees too much money can cause problems because "paying people more than their overall value renders them vulnerable in a downsizing or restructuring" (Zingheim and Schuster, 2000, 114). A pay increase can make an employee a target for later cost cutting. This also poses an additional problem in that it "also makes them reluctant to seek something new on their own initiative because of inability to duplicate their current pay" (Zingheim and Schuster, 2000, 114). Human resource management wants to foster a creative and energetic workforce, not one sluggish and complacent as a result of compensation. Action should not seem like a bribe. Employees in such science oriented markets are intelligent individuals who will see through weak attempts to ameliorate concerns. However, the fear of overcompensating an employee cannot dwarf the need to continue to provide "maintenance factors" which are those "helpful in motivating workers" for the short term and "motivating factors" which "increase job satisfaction and are more permanent" (Verma, 1996, 65). Motivating factors are more important to the long term and include things like opportunity for advancement, achievement recognition, work challenge, and a sense of responsibility. These can be hard to maintain during the difficult period of restructuring but should nevertheless be a priority. Also important are the hygiene issues that contribute to short term well being, such as favourable working conditions, compensation, and administration. Other issues that can be important may also include relationship with peers. All of these dynamics are changed when temporary workers are introduced to the workforce, especially in those rare instances where the company has never before employed such workers. It is a difficult administrative matter to make such a wide reaching employment policy change during a restructuring and should therefore be avoided. In the case of Pharmaco, the knowledge of employment policy changes needed to be delivered with confidence to permanent employees to avoid panic. Explanation as to why temporary workers are being employed coupled with a clear scheduling of permanent and temporary workers to broadcast cooperation and productivity would have benefited Pharmaco's strategy. Managers did not seem especially interested in employee concerns, however. Timeliness is also an important issue for consideration. "Decisions about restructuring should be made, announced, and implemented as soon as possible after the deal" (Brisco, 2004, 102). Employees appreciate when a business takes the time to keep them informed about major decisions that affect their careers. It shows a philosophy that understands how important the employees are to the health and success of the corporation. Best fit theory requires careful understanding and application of human resource direction. If policies are not applied consistently, this can lead to staff demoralization. The dangers emerge when issues like discipline and grievance communication, pay allocation and performance evaluation are not consistent and clearly understood by all. In the case of Pharmaco, employees were confused about company expectations and the future. The breakdown in communication and understanding between top and middle management is a large concern for the future health and welfare of a corporation. Charles Heckscher (1995) found that while top management may perceive effective decreases in bureaucracy in policies designed to foster innovation, middle managers will consistently perceive these "changes increase bureaucracy and increase organizational politics" (16). Despite the desire to increase employee education and creativity, the middle management see the companies become "more rule-bound and more narrowly focused rather than less and less entrepreneurial rather than more" in times of economic difficulty and restructuring (Heckscher, 1995, 16). This is a bureaucratic problem that Pharmaco did not seem cognizant of or prepare for in its restructuring. Real reform to foster teamwork and employee empowerment must go beyond lip service. Honesty must be a key component of any communication strategy since "false assurances will only help in the short term" (Sewell and Scarbrough, 2002, 180). Managers must also understand that their responsibility is to maintain a high level of employee loyalty. This is especially critical in the case of a pharmaceutical company, which requires both a high level of education from its employees but also discretion. References: Brisco, Dennis, International Human Resource Management, 2nd ed. Routledge, New York: NY 2004. Cenzo, David and Robbins, Stephen, Fundamentals of Human Resource Management, Von Hoffman Press, 2005. Fitz-Enz, Jac, How to Measure Human Resource Management, McGraw-Hill, New York: NY, 2002 Heckscher, Charles, The Limits of Participatory Management, Across the board 54, Nov/Dec 1995, 16-21. Ivancevich, John, Human Resource Management, Mc-Graw Hill/Irwin, New York: NY, 2004. Losey, Mike, Ulrich, Dave, and Meisnger, Sue, The Future of Human Resource Management: 64 Thought Leaders Explore the Critical HR Issues of Today and Tomorrow, John Wiley and Sons, Inc, Hoboken: New Jersey, 2005. Maund, Linda, Introduction of Human Resource Management: Theory and Practice, Palgrave Houndmills, Basingstoke: Hampshire, 2001 Noe, Raymond, Fundamentals of Human Resource Management, McGraw-Hill/Irwin, New York: NY, 2004. Philips, Jack, Accountability in Human Resource Management (Improving Human Performance,) Butterworth-Heinemann, Houston: TX. 1999. Schuler, Randall, and Jackson, Susan, Strategic Human Resource Management, Blackwell Publishers Limited, Oxford, 1999. Sewell, Helen and Harry, Scarbrough, Human Resource Management in Context: A Case Study Approach, Palgrave, New York: NY, 2002. Skarlicki, Daniel, "What do we know about Restructuring and Downsizing" Psynopsis, Spring 1996. Accessed 5/20/2006.http://www.cpa.ca/Psynopsis/restruct.html Verma, Vijay K., Human Resource Skills for the Project Manager; The Human Aspects of Project Management, Volume 2, Project Management Institute, 1996. Yoshio, Higuchi, "Corporate Restructuring and its Impact on Value-added, Productivity, Employment and Wages", Keizai Sangyo Journal, 2004. Accessed online 5/20/2006. http://www.rieti.go.jp/en/papers/research-review/015.html Zingheim, Patricia, and Schuster, Jay, Pay People Right! Breakthrough Reward Strategies to Create Great Companies, Jossey-Bass Inc., San Francisco, CA, 2000. Read More