Strategic Human Resource Management of Pervengines - Case Study Example

Strategic HR Management Introduction: For every organization training and development of the human resource must be design such a way that it can take the organization forward. If the process of training and development is not proficient or suitable; the consequence is an administrative setup that is a “hindrance to everyone in the organization”. (Stuart, 2013) Stuart in his review has also mentioned that “Rather than get mired in mindless formalities; HR should facilitate the growth of the organization, for all of which Human Resource training and development is the foundation”. (Stuart, 2013) The main objective of this paper is to analyze the strategic HR policies of Pervengines with focusing on two key areas viz. ‘Recruitment and Talent Management’ and ‘Learning, Knowledge Management and Leadership Development’. What will the competitive marketplace for the company’s products and labour look like over the next 5 years? Over the years, the labour market has changes considerably. In every industry the change is very prominent and organizations across industries need to change their mode of operation, training and recruitment process as well as other schemes associated with the labour industry accordingly to remain competitive in this market. In recent years the number of unemployment is increasing rapidly as over 205 million people remain jobless all over the globe. The total number is accounted for 19% of total work force among those 7% is jobless and 12% are associated in part time jobs. After the financial crisis of 2008, the world is going through a period of great moderation. But that does not help the unemployment level to a great extent. (The Economist, 2011) Like every other developed nations, in the UK also, the employment scenario is not so much rosy as the financial crisis of 2008 had its impact on the economy in a great way. In recent times, the scenario of UK labour market is mixed one as the country is able to come out from the great recession phase of 2008-2010 but still there are some difficulties. In recent report, various experts’ organization suggested that the level of unemployment will again increase in the UK in coming years. If one analyse the recent trend, in 2013, the unemployment rate increased up to 7.8% and at the same time employment rate also reduced to 71.4% with a drop of 0.2 % in the year 2013. The reports also suggested that the unemployment rate in 2013 was supposed to be near about 8% and it will continue to grow in coming years. There are various organization predicted the future unemployment trend and all of them predicted the figure to be around 8% with an increase of nearly 2% from 2012 and it will continue to rise. The reason cited as poor growth of the UK industry, increasing trend of self –employment and also the trend of working lesser hours among the present group of employees. The trend will started to go up from the third quarter of 2014 and some key reasons are “increased numbers of inactive people re-joining the workforce; on-going weak demand (despite rising productivity); and public sector job losses due to spending cuts.” (Carty, 2013) Most alarming part is the level of youth unemployment as the survey predicted that “youth unemployment will increase from 958,000 in Q1 2013 to 980,000 in Q3 2014.”(Carty, 2013) Another key trend associated with the employment in the UK is the growing tendency of the part time work. The survey also reveals the fact that there was a sharp rise in the unemployment level in last 5 years and at the same time the number of part-time workers is also increasing. In the recent survey the number of part time worker is showing at 8.12 million. This increase is an alarming sign for the economy as the experts believes that “the rise in part-time working could hamper economic recovery”. (Carty, 2012) Carty in his report has also mentioned the comment given by economist Philpott, where he has mentioned that “It would seem that the jobs story in the most recent quarter is not so much one of full-time vs. part time work as temporary as opposed to permanent work, with an increase to 0.65 million in the number of people working as temps because they can’t find permanent jobs”. (Carty, 2012) Before discussing their strategy let discuss about what are the changes in the white goods market have taken place in the past few years and what are some of the future trend in this industry. 1. Pervengines is an UK company associated with various white goods making companies across Asia and other parts of the globe where they used to supply motors. The amount of products in demand from white goods industry is increasing every year as in 2011 it touches 1 million in UK. Analysts suggested that that market volume for the same supposed to reach £3.81 billion by 2015. Among all white goods material most demand is for the washing machine and other washing instruments, dishwasher and laundry products. The volume is almost 38% and the next highest demand is for refrigerator with 34%. 2. Cooking materials have a demand of 28% among all the white goods and trend is predicted to be remaining the same in coming years. Moreover, people are now looking for online purchase rather going to store and choosing what they want. (Market Research World, 2012) 3. In the UK market the growth is although very slow, therefore there are number of European companies started to focus on the Asian market where the trend in the real estate industry is very positive. According to the report published in Market research World (2012) “a major influence in the UK white goods market is awareness concerning the environment. This combined with spiralling energy costs is fuelling consumer demand for energy-efficient products. In addition, some white goods, which were previously considered luxuries, have also impacted the market as they are now considered standard home appliances” (Market research world, 2012). According to this report, between 2011 and 2015, the UK white goods market is expected to increase by 7.3% with cookery appliances undergoing the greatest growth of 8.6% during this period. This growth is being predicted mainly due to increasing consumer interest in home cooking and concerns over healthy eating 4. As accompany, it is important for them to look beyond UK also to expand their business. For every organization across various sectors the key market is the Asian Market. Among Asian countries, India and China are the two main destinations for ant organization across sectors. Let’s consider the example of China, where the rate of growth in white goods industry in last few years was very high. In 2012, he growth was on high pace in first 4 months, from January to April, after that the growth started to slow down as the industry is going through conservative corrective phase. “After the subsidy policy terminated in the end of May, the Chinese household appliances market underwent a period of adjustment, in which sales of TVs, refrigerators, and washing machines declined 37.8%, 29.8%, and 43.7%, respectively. Air conditioner sales, however, continued to expand due to seasonal demand.”(Yahoo Finance, 2013) This trend is supposed to continue in the future the growth of the white goods market from 2002-2008 was as high as 91.5%. Among various products, air conditions sold maximum in terms of value with 34.2% of total market sales. The fastest growing sector was electric shower, the value increased by 757.8% during that phase. In terms of unit, cooling fan was the highest and trend is continue to be like this as the rural markets have the highest trend of growth in coming years. (French, 2009) What should be the company’s core competence(s), especially over the next three to five years? There is a very popular concept going all over the globe and that is in coming 5 years’ time, the world will start producing products for the Chinese market as the demand for various goods and applications specially of those belonging to white goods sector will be maximum in China. So keeping that in Mind Company has to set its own core competencies besides expanding its business in UK. This is mainly because the real estate industry is going at rapid pace and so to make living smooth the demand of various products of white goods segment will increase. Oprita (2013) in his review has mentioned that “China will become "the largest and the most powerful nation in the world by the end of this decade" and many of the future global brands will originate from there”(Oprita) The concept of core competency was first introduced way back in 1990s. One can define core competency as “collective learning in the organisation, especially how to co-ordinate diverse production skills and integrate multiple streams of technologies...core competence is communication, involvement and a deep commitment to working across organisational boundaries...core competence does not diminish with use. Unlike physical assets, which do deteriorate over time, competencies are enhanced as they are applied and shared” (The Economist, 2008). Following core competencies or strategies are very much important for organization of any sector to capture one of the biggest markets of the modern world –China, and for companies like Pervengines it is more important as the recent market surveys have predicted that in coming years China will be the biggest market for the white goods industry. To capture that market: 1. The organization need to develop proper business plan to capture the potential market. 2. Reducing operating cost by introducing higher end technologies such as robotics and other automated tools so that company can reduce the cost associated with labour. 3. Needs to make centralized production house for all motors associated with white goods and must implement a well thought out supply chain management system to reduce the deliver cost. 4. Must develop a well thought out business tie up with leading players so that they can maintain a strong market position. 5. Regular training of the employees who are associated with motor operation as well as production is absolutely necessary. It will help them to get well equipped with modern technologies and their implementation. 6. In China, over the years the white goods market showing a faster growth rate in rural areas compared to the urban. (French, 2009). Organizations such as Pervengines, who are targeting the white goods sector needs to develop their strategies keeping in mind this change in the target audience. It is very clear that to capture the biggest market in white goods industry, a more rural centric business plan and promotional model will be a successful one for the company. What kind of human resources will the company need in order to compete successfully? Like any other industry, UK white goods industry and companies like Pervengines needs well trained human resource in modern times to able to compete with the other companies across the globe. Generally, the white goods industry is more or less based on marketing of products available with the companies. Be it electronic goods or cooking utensils, be it cloths or any other thing- marketing and sales team and HR policies associated with it is very much important. For sales and promotion, organization like Pervengines needs employees who can reach to more number of people, have clear knowledge about the locality and most importantly have knowledge about the test of the people. In white goods industry, employees who are successful are more or less from local areas, having clear knowledge about changing demand pattern and also choice of the customers. These sales people are not important to increase the business volume but at the same time, they are key in development of new market segment as well as creating brand awareness among people. In recent years the white goods industry has grown rapidly and with emerging market like India and China, companies all over the globe now started to invest more to get better resources and advanced technologies in place to compete in the market. In recent times, various organizations in UK are looking for human resource with three distinct skills - professional background, tradition and ideology. Over the years, organizations are more focusing on training employees with high technology along with cross cultural trainings. In order to get success, companies in UK can adopt policies followed by Chinese white goods market. Companies like Pervengines can follow the HR policies followed by various white goods companies in China where working is considered as meticulous science with a definable knowledge base. Employees must have quantitative and operational knowledge with universal applicability related to specific functional skills (Borgonjon and Vanhonacker, 1992, p. 327; Qiu et al., 1989, pp. 112). To incorporate all these skills among the employers as well as in the managers, organizations are giving more emphasis on the “traditional numbers-oriented (hard) subjects and far less time are spent on people-oriented (soft) subjects” (Bjorkman and Lu, 1997, pp. 155; Warner, 1995).To get success in the Asian market, especially in China, companies like Pervengines need to follow some of the Chinese work culture as well as employee policies because training of their employees who will be in charge of marketing need to understand the culture of the people of the target market must have a clear idea about the same. In terms of cross cultural training following 5 points needs to be taken care by the companies: area of studies, cultural assimilation, language preparation, sensitivity training, and field experience. (Siu & Darby, 1999) Not only that, it is important that company must develop a proper balance between various departments inside the organization and at the same time all the members of the board of directors need to be co-operative with one another. Understanding among each other is important for the success of every organization. What type of HR practices is relevant to building the company of the future? How should dynamic capability be developed? With every passing years HR policies of every organization is changing. The changes are dynamic and it varies according to the demand of the market, industry as well as changing government policies. In this paper, the focus is on the companies who are supplying motors for the white goods companies. The most relevant HR practice for this industry can be Network Approach for recruiting people. It can be defined as “a large, informally defined group of professionals who often possess a wide range of expertise who work in mutual consultation.”(Kwan, 2013) In coming years, following HR practices will play a major role in ensuring high performance of the organizations. These are: Staffing: Apart from traditional employee referral, organization can rely of various social networking sites to get better people for various vacancies. Training and Development: Various organizations are following network approach in their training and development program. Formal training and mentoring are global methods associated with development of effective work force, but at the same time leadership development program is also important for the future as it will help the future leaders to develop proper collaborations among each other. Performance Management and Compensation: A proper network based HR policy can only be implemented if the organization started to focus on performance based compensation policy. Employee capability prototypes tend to accept an individual-centric framework, but for future collaborative and network-building behaviours in compensation is a key to make the performance of the people more dynamic. (Kwan, 2013) Development of an effective leadership team and what contribution HR can have in bring about a necessary culture change within Pervengines In every organization HR plays an important role in developing an effective organizational culture. In order to get success in the modern and highly competitive market a well thought out HR policy is absolutely important. For companies like Pervengines, HR plays a very important role. In order to book success company has changed its HR policies over the years but although those HR policies were helpful but as it was mainly associated with reduction of employee strength, introducing performance based pay therefore people associated with this organization not ready to accept these changes. There are 4 main challenges that HR of all organizations across industries often faces and those are: 1. Attracting new talent and retaining existing ones. 2. Align, involve, quantify, assess and reward performance without any biasness and making every employee feel that their involvement is well appreciated. 3. Reducing spending of various departments and increasing operating profit for the organization. 4. Analysing future demands of employees, development of effective training facilities and also solves various other issues associated with employee performance appraisal and recruitment. Every organization across the globe is looking for some specific answer for all those questions. In order to develop an effective leadership team the HR need to contribute in following ways: Design and develop a proper HR policy for all the employees across the operating firms of the company. The HR team needs to develop a well thought out plan where performance based pay get a major importance as in modern era; performance is the key for the success of the organization. Organization needs to implement voluntary retirement service also with exciting package for the old staff who then can feel interested in opting for those so there can be a great number of vacancies for the young generation. While recruiting the new Marketing and Finance head for the company, HR as well as the MD of the company needs to make it sure that whom so ever get recruited for those post, they must have high amount of hand on experience in those fields. Both the marketing and finance head must have advanced thought process about running of this organization so they must go along with all the other leaders of the company. There has to be regular training session for all the employees of Pervengines so that all the staffs can get accustomed to all new technologies and at the same time as the MD of the company is looking for introducing Robotics in production system-so that process needs high level of training. Apart from arranging proper training for all the operational staffs in the organization, it is important for arranging proper training for all the other staff members as well like the marketing staff and the finance staffs. To ensure that organization is growing in a steady pace a proper understanding among all the staff members of all verticals is absolutely necessary. Apart from following above suggestions, there is another thing that HR department need to figure out and that is to choose which aspect is best suited for the organization: Best Fit or Best practice? Generally Best Fit model is depends on what that particular organization feels best possible solution for them considering the market situation competition and their own future strategies. Best fit is not a set plan as organization always makes modification according to their feasibility. Likewise, Best practice is the processes which are followed by various organizations over the year as set principals. Stratford (2011) in his writing has mentioned that “best practice assumes that there is one practice that is better than others. The reality is that there is likely to be a range of good practices, some of which will help an organisation and others which will hinder. “(Stratford, 2011) It is not right to follow process used by others or previously followed by the organization itself without considering the needs and requirements of the time taking into consideration present market condition, labour market demand government policies etc. So as an organization which is going through a structural reform, it is important for Pervengines to adopt the best fit policy to accommodate changes what the MD or top management like to incorporate. Dalton and Austen (1995) in their review has mentioned that the level of employee commitment to the business can be enlarged by teaching all the employees some core basic values associated with organizational behaviour as well as day to day functioning. Among those values, most important one is maintaining a good relation between all the top management employees such as managers as well as MDs and at the same time maintaining good relation between top management and workers.In the stage of ‘It is important for the current HR team to identify the major loophole which was there in the operation of the organization in previous few years and that was the existing enterprise culture did not match with the training philosophy of Pervengines. Therefore, it is necessary to introduce a ‘learning culture’ from senior to junior management levels. To make this training program an effective and up to date with modern working philosophy, HR team must include components like language training, cultural assimilation, sensitivity training, communication technique and appraising staff in the training module. (Siu & Darby, 1999) Conclusion: It is important for every organization to have a great HR team who can derive better company policies, recruit efficient people and also arrange better training facilities to make it sure that organizational growth is in the right path. To make it happens a proper co-ordination among all the top level managers is important. In this case also there is no exception. To make it happens; HR department needs to change its policy with the time making it up to date and innovative. Moving forward, the department of HR must implement network framework in order to maintain talent management initiatives. It is very important that an addition of this network approach with the existing old HR policies will enable “collaboration, talent development and knowledge sharing. “Adopting additional network-centric tools will only further reinforce an organization’s ability to leverage its resources and flexibly adapt to environmental contingencies. 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