HRM Practices Followed at Retailco - Case Study Example

Executive Summary This report is an evaluation of the various corporate as well as HR strategies, HR policies and the HRM practices followed at Retailco. The report has a special mention towards a retail unit of Retailco, Riverside whose study is an attempt towards identifying and analyzing the various shortfalls and conflicts which have surfaced and also those which are latent and not clearly visible, but are present nonetheless. The several issues involved in this report are those related to the recruitment of part time staff members as against full time employees put forward by the head office. Moreover, a clear manipulation of HR policies by line members who are majorly involved in the HR decision making processes at Riverside, has been attributed to the contradicting corporate strategy of cost minimization as well as quality enhancement. The manoeuvring of the policies by line managers through recruitment freezes, employing part timers as method of cost saving (and exploiting them by overwork in case of staff shortfall) and the negligence shown towards training and performance appraisal are the HR major problems seen at Riverside. A very myopic sort term view of line managers, inexperience and naivety of the HR personnel and qualitative nature of HR targets have been identified as major deterrents towards effective HR strategy implementation. Thus, it has been recommended that there is a need to closely monitor the recruitment of an experienced HR manager, a need to attach numbers to HR targets, document and benchmark appraisal activities along with a constant audit and review of the HR procedures followed to ensure conformity with corporate policies. Use of e-HR has also been referred to. Table of Contents Introduction 4 Organization Structure at Riverside 5 HR strategy and policies: Their integration with corporate strategy 7 Inconsistencies and contradictions 9 Conclusion 12 Recommendations 13 Introduction Retailco is a retail giant in UK. It operates in multiple store grocery retailing sector and employs over 10,000 staff. It has a range of 700 branches spanning across UK. Its current strategy of cost-minimization and quality enhancement (improving customer service) has a strong effect on all its divisions and a special mention to its retail division, Riverside has been made in this report. Riverside is comparatively a smaller and simpler organization in itself and employs around 450 staff. Although, it has a very good record towards managing budgets and financial performance targets, it is facing severe shortcomings when it comes to its HR practices. The HR management (HRM) issues at riverside have been a result of several variables and have been illustrated and elaborated here. The report starts with an evaluation of the organizational structure and design of Riverside. The HR strategies, policies, other HR issues and their integration with the overall corporate strategy at Retailco has been vividly defined and described. There are several inconsistencies and contradictions which have evolved out in the process of the analysis. These have been elucidated to give a broader insight into the issues and problems. Finally, concluding the report is a brief re-visit on the aspects and contexts discussed in the report. The recommendation at the end of the report and an illustration of a need to follow those, is my sincere attempt to facilitate a process of revamping and re-energizing the dying HR structure at Riverside which would ultimately have a significant impact on Retailco too. Organization Structure at Riverside The organizational design of Riverside, A retail division of Retailco, can be discussed under the reference of a ‘Simple structure’. It has low degree of departmentalization and is not very elaborate (Mintzberg, 1983). The structure is almost flat with only three levels, a free body of staff and a central decision making authority who oversees the store operations as a ‘duty manager’ (The general manager) although with large spans of control. There is very little formalization. Figure 1 depicts the structure. Figure 1: Organizational Structure at Riverside One of the major advantages of this structure at Riverside is its cost-effectiveness which goes well with Retailco’s corporate strategy of cost-minimization as well. It is cost effective due to the flexibility it provides (additional feature where senior store managers can act on behalf of General Manager in his absence), its inexpensive maintenance and clear accountabilities. Since, Riverside (part of a very large and complex organization – Retailco) is a relatively smaller entity of 450 staffs, maintenance of this simple structure is feasible. This simple structure has been well complemented by distribution of powers to the senior store managers (who are responsible for their own departments and as ‘duty manager’ in GM’s absence) and the section managers (who were responsible for the day to day activities in their sections and various other local HR decisions like recruitment and selection, training, scheduling and performance appraisal (Fisher, et al. (1997)). Nevertheless, there are various limitations in the process: (a) The HR personnel manager has no HR experience or knowledge. The role which is a highly specialized one is seen as equivalent to any other routine activity which dilutes its effectiveness. (b) The section managers have a lot of authority in HR decisions and consult personnel manager only rarely. (c) There is huge difference in the employment conditions of senior managers and section managers. Senior managers have a structured career path, higher than average reward package and secure employment conditions, whereas, section managers have low earnings. HR strategy and policies: Their integration with corporate strategy Clearly, Riverside adopts a strategic human resource management approach as against a conventional one where the task of managing the staff vests with line managers who interact with the staff. It goes beyond the concepts of employee motivation and employment laws (Mello, 2003). The management level HR strategic vision of Retailco can be encapsulated as: increasing employee productivity but minimising work intensification (all at minimum cost); maintaining constructive relationship with trade unions; and improved workforce stability. For the achievement of the above stated strategic objectives, the company decided upon certain HR policies which were its plans of action (Aswathappa, 2008). These policies are to act as benchmarks for comparing and evaluating performance over a period of time. Retailco’s corporate strategy of better customer service was to be achieved through an HR policy of customer service training programmes. A policy of balancing the ratio of full and part time employees for better workforce stability; share option and performance appraisal schemes to motivate and reward employees; along with efforts to improve employee communication to enhance productivity had been set out by the company. This vision of HR strategies and policies impacting the performance of overall organization has been lucidly depicted in ‘The Guest Model of HRM’ by David Guest in 1997 (Bratton & Gold, 2003) which is shown in Figure 2. Figure 2: The Guest Model of HRM This model explains how an HR strategy can lead to development of HR policies and practices on recruitment, training, appraisal, reward, compensation and employee relations. These HR policies lead to HR outcomes of commitment, Quality and flexibility if implemented properly. The HR outcomes in turn increase or decrease motivation, co-operation and commitment to the organization; which are the direct behavioural outcomes of the above. Behavioural patterns of an organization’s employees determine their performance either positively (higher productivity, innovation, quality conformance) or negatively (low productivity, absenteeism and employee turnover). Employee performance gets transformed into financial achievements of the company in terms of profits and return on investment. However, the HR policies and practices at Riverside have been unhealthy (despite a good vision set out at the top corporate level of Retailco) and hence, has started to negatively impact the entire organization unit as predicted by the rationale presented in the above model. This has mainly occurred due to the violation of the original HR policy chartered out in accordance to the HR strategy aligned with the corporate strategy of Retailco. This violation occurs due to several barriers inherently resting deep inside the riverside line managers. A part of the blame also goes to the conflicting corporate strategies chalked out. Inconsistencies and contradictions Corporate Strategy The first issue is that of a contradicting cost-minimisation strategy and quality enhancement (better customer service) strategy. This contradiction has been intensified due to inconsistency in monitoring the achievement of both. While strict adherence to budgets and targets are quantifiable and closely monitored to keep cost in check; the evaluation and scrutiny of the HR responsibilities which would determine the quality enhancement aspect is not directly or objectively monitored. This attitude towards HR practices has led to a creep of laxities and latitudes when it comes to HR decisions and a proportionate decrease in the importance accorded to these. This approach has manifested itself into an obvious disregard for and manipulation of all HR practices at Riverside; be it in terms of compromising with the quality and use of standard labour, erratic recruitment and selection process, unbalanced deployment of staff, or negligent performance appraisal system. Line or Local Managers’ Discretion Due to the obvious discrepancy in the corporate strategy, and thus, the difficulties involved in implementing these have led the senior store managers to provide a leeway to its line managers when it comes to HR practices. This authority is well utilized at the discretion of the local line managers to manoeuvre the company HR policies so as not to restrict their tangible performance targets. The several strategies employed by these line managers, the rationale or reason behind doing so and their deviation from the actual company policy have been described in the following section: Practice at Riverside: To recruit more number of part time employees (current statistics state 71 % of the staff to be part timers) and a requirement for them to work for extended hours without any premiums paid for time beyond average work hours. Lower wages but more pressure to improve customer service and efficiency is what is expected out of these employees. Rationale behind it: The individual stores like Riverside are given an economic or budget constraint to be met and sanctioned with limited financial resources. This limitation is overcome by a viable option of extracting the same work for no premium overtime charges to part time employees as against full timers. Deviation from Retailco’s actual policy: Retailco had set out a vision for workforce stability with a balanced ratio of full time and part time employees. The company envisioned the requirement of more full time employees owing to the commitment and loyalty which they generate towards the organization over a period of time as against part timers who work erratically for shorter durations and have no emotional or professional attachment to the organization. Also, it aimed at minimizing work intensification of Retailco’s staffs. Practice at Riverside: Head office budgets drive the recruitment levels at Riverside. In order to keep a check on budget so as not to overshoot it; recruitment freezes are called at Riverside to keep costs down. Rationale behind it: To stay within the head office budgetary limits, part time employees can be utilized to cover for shortfalls in staff. Deviation from Retailco’s actual policy: It envisioned adequate staff, mainly full time employees, committed to organization’s customer needs and demands. Practice at Riverside: Using line or section managers for day to day training and development of new staff. Also, the use of ‘customer service assistants’ as flexible labour to compensate for staff shortages created by ‘recruitment freezes’. Rationale behind it: Extravagant spending on additional and surplus staff such as ‘customer service assistants’ cannot be afforded when cost-minimization is to be achieved. Deviation from Retailco’s actual policy: Use of a specialized training manager for delivering customer service expertise and training package. The head office also deploys the provision for ‘customer service assistants’ to attend to customer queries, service requests, complaints and other demands. The stores are provided with additional funds and financial resources for the same. Practice at Riverside: No or negligible reward and performance evaluation or appraisal system. Rationale behind it: Employment of majority of staff as part timers limits the need and feasibility of performance appraisal which requires investment of a lot of time and effort on the part of store managers and/or section managers. Deviation from Retailco’s actual policy: The Company attempted to introduce performance appraisal for all employees so as to encourage training and internal development in the quality of workforce. Critical Examination of the factors and reasons contributing to the barriers towards the successful implementation of the HR strategy and policies set out by the head office leads us to a primary list of three major impediments to Strategic HRM (Mello, 2003): (i) Short term focus of Riverside Managers A complete myopic view of line as well as store managers at Riverside is evident from the above initiatives towards manipulating the HR policies of the company. For long term sustainability and cost competitiveness, it is imperative for every company to have skilled, committed, loyal, and a stable workforce. Focus on immediate cost cutting measures to meet budget and performance targets is intensifying the loss of all the above mentioned aspects and is a blow to the company as well as to the managers associated with it, in the long run. (ii) Inability of HR to think strategically As is evident from the description of non-HR knowledge and inexperienced HR personnel manager at Riverside, it is logically deducible that he is unable to lay the required emphasis on the need for fulfilment of strategic HR objectives. He is quite apparently unable to influence his fellow store managers as well as his line managers with regards to the role of strategic HR in organizations, (iii) Difficulty in quantifying HR outcomes HR outcomes are abstract in nature. They are intangible and can only be perceived and not seen objectively. They are unquantifiable and have a lot of subjectivity involved. Under the pressure of cost optimization, that Riverside managers are working under, only those activities that contribute to the bottom-line (profit margins) is regarded worthwhile and the rest is discarded as non urgent (Greer, 2006). Conclusion With this report, I have tried to present and elaborate the HR malpractices at Riverside (a retail store unit of Retailco). A giant and complex organization as Retailco has been seen struggling in terms of the treatment met to its staff at its various sub units in the guise of adherence to cost minimization initiatives. The line / section managers are at the fore front of such mismanagement. This report illustrates several such cases of HR negligence along with the rationale provided by the line managers towards the adoption of such tactics. From recruitment to staff deployment to training slackness and casualness shown to performance appraisals, it has become highly critical for a global player like Retailco to address these issues in a pro-active and proficient style. It is seen that even though Retailco does have good and effective HR policies in place, it is often not adhered to, unbeknown to the head office. Therefore, not only policy formulation but its timely and efficient execution should also be on the agenda of the management at Retailco. In conclusion, it is righly pointed out by the retail personnel director that Retailco has a wide range of HR challenges. These challenges have been concisely evaluated in this report. The situation has been aggravated further by the irresponsible, short term approach of the line and store managers at Riverside over a period of time. A re-look into the priorities set by these managers at Riverside needs to be effected. Recommendations After having analysed the situation and HR position at Riverside, it can be justifiably argued that certain strict and sincere efforts need to be expended by the management at Retailco so as to correct the defective HR environment at its retail stores with particular reference to Riverside. From a long term perspective, it is very essential that not only cost-competitiveness but also the quality and human resource aspect is paid a close and equal attention. Although, a lot is already being done to manage costs, it is imperative that the HR prospects are also strengthened for the company. A system of checks and balances towards HR practices, as is done in case of financial objectives is the need of the hour. The following would be my recommendations based on my understanding of the scenario: A. The root cause of the problem has been identified to be ‘A weak, ineffective and inexperienced HR personnel’. Therefore, the first and foremost requirement lies on the shoulders of the HR management at Retailco to recruit and select someone who is well versed with the nuances of HRM, its implications as a strategic partner and its implementation. A rigorous and thorough selection procedure for an HR manager should be incorporated in the system of Retailco. B. Analysis and evaluation of problems and hindrances towards effective implementation of HR has been pointed out to be its subjective and qualitative nature. Thus, I propose to correct this condition by attaching numbers to HR objectives also. For instance, the headquarters should specify the ratio (or a range of acceptable numbers) of full time employees to part time employees on the payroll of Retailco. Also, specified could be the number of hours spend at training by each employee under the supervision of a customer training specialist. The achievement of these numbers should be included as a performance target for the managers which would thereby eliminate the motivation to flout the specifications. C. Performance appraisals should be made a benchmark activity, which is to be carried out as an essential practice at Riverside. The documentation and procedure of appraising the employees should be reported directly to the head office. D. Constant audit and re-view of the HR practices (Bratton & Gold, 2003) will keep deviations in check. Assessments of the training (Schuler, et al. 1989) provided (not only in terms of hours spend but also an estimation of improvement before and after the training programme). The evaluations need to be recorded and the managers should be accountable and answerable towards any evidence of negligence showed in this context. E. Implementing information systems to manage and organize HR activities, tasks (Gueutal & Stone, 2005) which can also act as an efficient medium for constant monitoring and evaluations for Retailco management. This would mean incorporating e-HR practices. It might also be helpful in cutting costs (which is one of the corporate strategy) by reducing manpower requirement and eliminating errors. Read More