HRM Practices of Future Solutions - Research Paper Example

Assessment: HRM Practices of ‘Future Solutions’ 1. Introduction 1.1. Background and Rationale What defines 21st century from the 20th century, which similarly had brought further advancements to human lives, is no other than the rapid technological changes that have dramatically altered the way things are done, especially in managing organizations. It has globalized interactions making business communications and transactions quicker; it has not only increased market demand but has made it more complex and multifaceted; it has stiffened competition requiring innovativeness and flexibility in organizations; it has realigned and revalued organization’s resources bringing to fore the critical importance of human resource in achieving organizational success. As Kazuo Ichijo stated (2006 p. 41), what is critical to organizational success in the 21st century is the development of people’s intellectual capabilities through knowledge creation and sharing. To which Nagel, Goldman and Preiss (1991 p. 10) conformed specifying that an organization’s lone greatest asset is no other than a knowledgeable workforce that is given the means to fully exercise its initiative. This undoubtedly placed human resource management into a strategic importance consequentially expanding its function which Rowden (1999 p. 22) defined as ‘a new generation of valued-added core HR functions [such as] career planning, executive development, training, succession planning, and organization development’ in addition to its traditional functions: staffing, recruiting, compensation, and benefits. With human resource management – defined by Jackson and Schuler (1995 p. 237) as an umbrella term covering human resource practices: recruitment, selection, and appraisal; policies that directly or indirectly and fully or partially influence the said practices; and HRM’s overarching beliefs and values – at the core of organizational success, understanding HRM planning practices would then be vital, especially in charting business strategy. 1.2. Aims A case in point is the losing out in cyberspace of Future Solutions, which initial competitive advantage of innovative product design by its software design engineers has been eroded by 20 percent in an increased competition in the generic off-the-shelf software both in the national and international market. What causes this downward trend of the company? What is wrong with the company’s HRM planning? How could the company be brought back into its former leading status in the generic off-the-shelf software market? These generally are the three main questions that this report would like to shed light into. Thus, this report aims to (a) determine the cause of the company’s downward trend in the generic off-the-shelf software market by analyzing its HRM planning practices based on the given data and guided by existing HRM theories; and (b) to outline a strategic plan that would regain Future Solution’s leadership in the generic off-the-shelf software market. 1.3. Method The method used in the case study is an in-depth library research. Both print and electronic sources are searched using the following key words: strategic human resource planning, human resource management, human resource, human capital pool, 21st century human resource management challenges, organizational development, and organizational change. Articles are browsed searching their relevance to the case study. Chosen articles are read through and sorted out as to which is useful and not, and highlighting relevant theories and concepts. Concretely this report is done in the following manner: (1) the instructions for the report is read and re-read to ensure full understanding for its full satisfaction; (2) the case being asked to be analyzed is read and re-read many times and as it is read, notations as to what is striking or questionable are made to guide the researcher in systematizing the report; (3) library research is done going through print and electronic sources; (4) the assignment is read again just to remind and guide the researcher in the choice of materials; (5) the researched articles are read for final selection marking the ideas that are found enlightening and useful for the report and choosing the reliable ones; (6) the case is now analyzed noting the important findings. In the course of analysis, terms that are found vague are further researched mainly from the internet; (7) the required format of the report and writing style is reviewed; (8) the report is written, reading it all over again, revising it until found satisfactory. 2. Analysis/Discussion 2.1. Appraisal of Future Solutions The Future Solutions, a medium sized enterprise in Singapore, is competing in the generic off-the-shelf software market that requires high flexibility and creativity as the needs and demands of this market rapidly change, as its competitors are increasing and becoming more and more aggressive, and as Dolbeck (2004 p. 3) reports, ‘prepackaged business management software has grown more sophisticated’. Having started out in the business successfully with its software design engineers, who create innovative product design, its competitive advantage, the Future Solutions is now lagging behind its competitors both in the national and international market. Appraisal of the company’s human resources shows an ageing staff with 45% of them already in retiring age (55- 65 years old), followed by the middle-aged 35 and 45 years old (35%), and with the younger ones (25-35 years old) only comprising 25%. Its 150 employees are tasked as follows: supervision and management (10 = 7%), administration (20 = 13%), software design engineers/ research and development (40 = 27%), production support (50 = 33%), web sales and distribution (30 = 20%). Furthermore, only 50% in the production and distribution department only are unionized. But more disturbingly, its competitive advantage – its software design engineers – are leaving the company with some pirated by local competitors, while others went abroad. This high turnover of design engineers has adversely affected the company’s performance: no new ideas and innovative products were created resulting to the company’s lost market leaders. As Gubman (2004 p. 24) stated, ‘in the knowledge economy, talent is the key to value creation and competitive differentiation’. To which Rowden (1999 p. 23) agreed saying that ‘innovation and ideas will be the currency of the next century’. And since Future Solutions is a family company, it has maintained its practice of hiring the sons of former or present employees rather than scouting for better candidates outside the organization. So until now, departmental management positions are being held by employee’s family members. It is in this context that the human resource planning practices of Future Solutions shall be assessed and analyzed. As Wright, McMahan and McWilliams (1994 p. 320) have indicated, what makes the pool of human capital a competitive advantage of the organization depends primarily on the human resource practices of the organization. Meaning to say, even how good the human capital pool of an organization is, it will not become a competitive advantage if human resource practices do not promote the objectives of the organization. 2.2. Analysis What has Future Solutions failed to do is what Gratton (1999 p. 170) referred to as the key challenge confronting organizations today, which is no other than keeping the organization’s tactical lead while pursuing its strategic success. Concretely, the Future Solutions is hardly hit at the very heart of its success – its efficient team of software design engineers, whose new and innovative ideas and creations has made Future Solutions the market leader. Tactically, the company was able to maximize this competitive advantage that in its early growth, it was able to lead the generic off-the-shelf software market. However, it failed to keep its advantage as it was not able to retain and further strengthen its most valuable human capital pool with some of its software design engineers gone over to local competitors, while others to its international competitors. Following Barney’s (1991 p. 105-106) resource-based model of sustained competitive advantage, also known as the VRIS framework, which suggests that a resource that creates value (V) for the organization, rare (R), inimitable (I), and non-substitutable (S) becomes the source of the organization’s competitive advantage described by him (1991 p. 102) as taking place ‘when a firm is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors’. To which Wright, McMahan and McWilliams (1994 p. 313) illustrated that among the different resources of the organization, the human resource appears to be the organization’s competitive advantage because among others it is the one which is more likely to be inimitable and non-substitutable, and it can also be valuable and rare. And unfortunately in the case of Future Solutions, the problem of high mobility in human resource was not addressed that the company’s competitors simply pirated its software design engineers leaving the company unprepared to deal with its hard blow. Why did this brilliant and innovative team of software design engineers leave Future Solutions is a question that could be traced back to what Gubman (2004 p. 13) described as the timeless challenges of continuity, among which, seen relevant to Future Solutions are the development and preservation of talents, and the measurement and reward of performance. As Gratton (1999 p. 172) pointed out, ‘it is the messages from reward, appraisal, and training processes, not simply the corporate rhetoric, which form the basis of sense-making and which give the steer on how to behave’. Relatedly, as cited in Chaudhuri (2009 p. 27) Guest’s (1999) survey of 1,000 workers in UK revealed that human resource management practices promoting ‘positive psychological contract’ appear to evoke positive response from workers. In a broader sense, Edwards and Wright (2001 p. 570) suggested that established systems affect workplace practice, change employee attitude and behavior which in turn benefits the work unit and in the end the company. Furthermore, its staff is ageing with almost majority of it in retiring age already while only 25% are young. Although Stiftung (2003 p. 4) believed that older workers are more focused than the young ones, it also stated that the physical state of older workers requires them to have more frequent short breaks for at least two minutes for their cells to recover from tiresome. Furthermore, in a study investigating the correlation between employees competencies and age as cited in Stiftung (2003 p. 6), it was found that those aged 40 and 50 ‘had high levels of competencies and were well placed to train young workers’. These views indicate that having a good combination of employees with younger age, middle age, and old age could be more beneficial to the company. And to determine this benefit, the combination of employees’ age should be seen in the light of the present context. What age bracket of workforce does 21st century demand? In his study of Japanese enterprises, which today are besieged by the problem of increasingly ageing workforce, Odagiri (1992 p. 3350 viewed that with the rapid technological changes having made accumulated skills to become obsolete in so short a time, current system requires more younger workers over older workers, as young workers are more flexible and highly trainable, needless to say that they have lesser economic benefits than older workers. Aside from this, the demand of the market in which future Solutions is competing with requires expertise that has been developed only twenty years ago. For example if understanding computer operations is too intricate for older people, on the contrary it is fun for younger people. Meaning to say, the technology that keeps the world spinning so rapidly today is the technology of today’s generation. Therefore, Future Solutions needs greater number of younger employees with expertise in software design, cyberspace marketing and only few older employees who are good in supervision. This problem of recruitment and retention in Future Solutions is in part attributable to its close culture termed by Rutherford, Kuratko and Holt (2008 p. 1089) as ‘familiness’ which dictates the company to make family membership as almost the determinant factor in selecting and deploying employees. Immediately the problem here is that it limits the company to search the best among the best, which also limits the company’s opportunity to create a rare human capital pool which according to Wright et al. (1994 p. 307) ‘high quality human resources are rare’ – one of the requirements to achieve competitive advantage. More importantly, in their study on the correlation of family control to business performance Oswald, Muse and Rutherford (2009 p. 126) found that family control significantly yet adversely affect firm performance. Such is supported by other studies as cited in Lee (2004 p. 47) which findings suggest that the power and incentives being enjoyed by founding families give them too much leverage to act on their own interests jeopardizing the firm’s performance. There is also the tendency that top management positions are reserved for family members rather than entrusting these to non-family members who are much more qualified. Moreover the deployment of employees, which according to McWilliams, Van Fleet, and Wright (2001 p. 1) ‘one of the keys to successful competition… is the effective deployment of human resources’, as illustrated by the composition of each department comprising Future Solutions suggests that a significant portion of employees, specifically administration (13%) and supervision or management (7%) could have been more useful if its number is appropriated to the research and development department, since it is this department that creates the company’s competitive advantage. 2.3. Conclusion Analysis of the case of future Solutions led to the identification of some problems in managing its pool of human resource that centers on retention and replenishment of staff, distribution of staff, and the close culture of the organization. Concretely, the problems identified are as follows: a. The company failed to develop in its most valuable human resource capital deeper commitment and loyalty to the organization resultantly failing to develop its competitive advantage into a sustainable competitive advantage. b. The composition of the company’s workforce is already ageing, which ramifications to the organization’s strategic human resource practices appears to be more negative than positive, especially so that the 21st century context which requires high level of flexibility and trainability – characteristics that are generally found in young workers. c. The close culture of the organization constricts it to select its employees from the best among the best within and outside the organization. Furthermore, too much familiarity in the organization tends to water down professionalism, which may have adversely impacted on human resource management practices. d. Distribution of the workforce does not strengthen the company’s competitive advantage with a significant number deployed in supervision and administration. This could be an accommodation of its ageing workforce and ‘familiness’. 3. Recommendations Two major actions are being proposed for Future Solutions to regain its competitive advantage: re-structuring and re-engineering. Restructuring defined by Gilson (2001) ‘as the process through which a company radically changes the contractual relationships that exist among its creditors, shareholders, employees, and other stakeholders’ is meant to improve the company’s market performance. Future Solutions needs restructuring because as explained Head and Hickle (1989 p. 1) companies do restructure to capably face problems that might undermine its effectiveness such as ‘shortening product life cycles, rapidly evolving technology, and intensifying… competition’. And Hammer and Champy (1993) as cited in Yeung (1995 p. 24) defined reengineering ‘as utilizing the power of modem information technology to radically redesign business processes in order to achieve dramatic improvement in critical performance measures’. Future Solutions needs reengineering for it to fully maximize its pool of human resources by refocusing their strength in furthering the company’s competitive advantage. What has to be restructured on Future Solutions human resource management practices for it to regain its leadership in the generic off-the-shelf software market are the following: a. Selection Process: Selection should primarily be based on the qualifications of the applicants regardless of their affinity to the company’s employees. Qualifications should emphasize knowledge base of the applicant, behavior, and commitment to work and organization. In addition, as workforce of younger age are found most efficient to adapt to the demands of 21st century work demand, the company should hire more employees of whose age ranges 25-35, and that the old age (55-65 years old) be given the opportunity to retire happily enjoying the benefits they more deserve from the organization and most of all that labor laws should be observed in the conduct of this action. b. Task Distribution: Tasks should be distributed according to the need of the operation giving more emphasis on its most critical aspect. As in the case of Future Solutions, which competitive advantage is its innovative product design of generic off-the-shelf software, its research and development department, which is tasked with product design, should be allotted a bigger number of employees. And since, competition in the cyberspace is intensifying and becoming more stiff, the research and development department could still be divided into teams: the research team – one to focus on identification of priority market and another one that would set initial ideas, design team – one that would design the product, one that would create the design, one that would test the design in the market. c. Human Resource Development: Human resource development should focus on the most superior workforce as this could make or break the organization. Development plans should answer two strategic questions that deal with what Mead (1998 p. 358) asked, ‘what strategic advantages do our labor resources give us?' and `what operations should we be planning in order to apply them most effectively’? Developing the organization’s human resource capital should not only center on building the capability of the organization’s workforce, but also in strengthening their commitment to their work and the organization and in boosting their enthusiasm that makes the organization growing. There are varied ways to achieve this, and according to Heathfield (2010) most commonly, it is done through ‘employee training, employee career development, performance management and development, coaching, mentoring, succession planning, key employee identification, tuition assistance, and organization development’. Rewards and incentive should also be critically addressed as most oftentimes this is one of the major reasons why employees leave the organization. As what Gratton (1999 p. 176) suggests ‘reward processes can be one of the greatest sources of leverage available to a company in its quest to increase organizational performance and effectiveness’. Maybe, it is high time for Future Solutions to review its benefit philosophy because as Rappaport and Barocas observed, ‘the traditional benefit philosophy of major American companies is [already] incongruent with the business climate of the 1990s’. Finally, since Future Solutions is engaged in software products, it should maximize technology that it may simplify administrative functions. By this, a significant number of employees allotted to administration could instead be maximized in areas most critical to the company’s operation. This would not only give the company a bigger maneuver to maximize its pool of human capital, but in the long term would economize its administrative expenses. As Yeung (1995 p. 24) argued, ‘reengineering HR processes is crucial for the HR function to reposition itself for other high value-added services’. For these to be done, change should start from the company owners themselves as much of the recommended actions require change in the existing culture of the company. Not unless the owners themselves accept the wisdom of the recommended actions, the projected changes in the company would not be realized. And for implementation, the company should create a highly qualified and efficient human resource team to ensure that the needs of the company and its people for human resource development would be addressed timely and properly. So the steps to be taken to get these recommendations into action are as follows: a. Submit this report to the CEO, Mr. Steven Chang, for comments and approval. Once approved, as the CEO of the company, he should present this to the Board of Directors similarly for comment and approval. b. Once approved by the Board, changes should be communicated through the organization from top to bottom making sure that the wisdom of the change is understood and making sure also that the unforeseen possible adverse effects of the proposed changes be addressed constructively. As what Heads and Hickel (1989 p. 1) suggested it is important that employees should know the reason of the restructuring and reengineering, the process by which these changes should be conducted, the possibility layoffs or that which might affect the present status of the employees – this should be answered by the company truthfully and correctly, and the possible contributions of the employees to make the change be implemented more positively. This would be best done by the CEO himself assisted by the department heads and supervisors. c. The human resource management team should then be created and together with the CEO, department heads and supervisors should lay out the specific implementing guidelines as to how the restructuring and reengineering should be done. In this manner, the development of the organization’s human resource capital will be strategically linked to the organization’s overall strategy and objective. Thus, human resource would be more developed in congruent with the company’s objective that would most likely develop the company’s internal capability towards the realization of the company’s goal. 4. Conclusion This case study only proves three important points regarding the link of human resource to the company’s success: a. What makes a company is no other than its pool of human resource, as it is this resource that could possess the key elements that could give a company its competitive advantage such as value for the organization, rare capability, inimitable skill, and non-substitutable. However, this could only remain a competitive advantage in a short span of time, if it would not be developed. Development should center in strengthening its capability, innovativeness, agility, flexibility and most of all commitment and loyalty to the company. b. Technological innovations should be utilized to simplify tasks that are simply peripheral to the operations of the company, paving the way for human resource to focus more on tasks vital to the company’s success. c. The increasing critical importance of human resources to company’s success further strengthened the necessity of creating a human resource department that is active, knowledgeable, flexible and innovative and more importantly, of having human resource management be a strategic partner of the organization in planning the company’s strategy. Reference List Barney, Jay 1991, ‘Firm Resources and Sustained Competitive Advantage’, Journal of Management, vol. 17, no. 1, pp. 99-120 (Google). 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